(Address
and telephone number of principal executive offices and principal place of
business)

Christopher
J. Reed

Chief
Executive Officer

13000
South Spring Street

Los
Angeles, California 90061

(310) 217-9400

(Name,
address and telephone number of agent for service)

With
copies to:

Ruba
Qashu, Esq.

730
Poppy Avenue

Corona
Del Mar, California 92625

Telephone:
(949) 355-5405

Facsimile:
(949) 759-7533

Approximate date of commencement of
proposed sale to the public: As soon as practicable after the effective
date of this Registration Statement.

If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. x

If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective Registration Statement for the same offering. o

If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.o

If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o

If
delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.o

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b2 of the Exchange Act.

This
registration statement relates to (a) the subscription rights to
purchase Series B Preferred (b) the shares of Series B Convertible
Preferred Stock deliverable upon the exercise of the rights and (3) the
shares of common stock issuable upon conversion of the Series B
Convertible Preferred Stock .

(2)

The
rights are being issued without consideration. Pursuant to Rule
457(g), no separate registration fee is payable with respect to the rights
being offered hereby since the rights are being registered in the same
registration statement as the securities to be offered pursuant
thereto.

(3)

Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as
amended.

(4)

The
securities being registered also include
[ ]
shares of common stock initially issuable upon conversion of the Series B
Convertible Preferred Stock. Pursuant to Rule 457(i), no separate fee is
payable with respect to the common stock underlying the Series B
Convertible Preferred Stock. In accordance with Rule 416, the number of
shares registered hereby shall also be deemed to include an indeterminate
number of additional shares of common stock that may be issued upon
conversion of the Series B Convertible Preferred Stock as a result of
anti-dilution provisions thereof.

(5)

Calculated
pursuant to Rule 457(g) based on the aggregate exercise price of the
rights.

The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

Explanatory
Note

This
Amendment No. 1 on Form S-3 is being filed to convert the Registrant’s
Registration Statement on Form S-1 (File No. 333-156908) into a Registration
Statement on Form S-3. All filing fees payable in connection with the
registration of these securities were previously paid in connection with the
filing of the original registration statement.

The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.

REED’S
INC.

10,000,000
Nontransferable Rights to Subscribe for up to 150,000 Shares of

Series
B Convertible Preferred Stock at $10.00 per Share

We are
distributing at no charge to the holders of our common stock on
[ ],
2009, which we refer to as the record date, subscription rights to purchase up
to an aggregate of 150,000 shares of our Series B
Preferred. We will distribute to you one right for every share of
common stock that you own on the record date. Each share of Series B
Preferred carries an eight percent (8%) annual dividend and will have
an initial stated value of $10.00 per share, and will be convertible into shares
of our common stock at a conversion ratio of
[ ] shares of common stock for each share of
Series B Preferred held at the time of conversion, representing an initial
conversion price of $[ ] per
share, which is subject to adjustment.

You are
receiving this prospectus because you held shares of our common stock as of the
close of business on May
[ ,
2009, the record date for this rights offering. As of the record
date, there are
[ ]
shares of common stock outstanding. We have granted you one right for
each share of our common stock that you owned on the record date. You may
purchase one share of our Series B Preferred for every 66.7 rights granted to
you. If you exercise your rights in full, you may also concurrently
exercise an over-subscription right to purchase additional shares of Series B
Preferred that remain unsubscribed at the expiration of the rights offering,
subject to availability and allocation of shares among persons exercising this
over-subscription right. . The over-subscription rights allow a holder to
subscribe for an additional amount equal to up to 400% of the shares for which
such holder was otherwise entitled to subscribe. The exercise price
for over-subscription rights is the same as the exercise price per whole share
as the basic subscription rights. Rights may only be exercised for whole numbers
of shares; no fractional shares of Series B Preferred will be issued in this
offering.

We intend
to offer any shares of Series B Preferred that remain unsubscribed (after taking
into account all over- subscription rights exercised) at the expiration of the
rights offering to the public at $10.00 per share of Series B
Preferred.

The
rights will expire at 5:00 p.m., New York City time, on
[ ],
2009, which date we refer to as the expiration date. If the rights
offering is undersubscribed, we may extend the period for exercising the rights
for up to an additional 30 trading days in our sole discretion. Any
rights not exercised at or before that time will expire worthless without any
payment to the holders of those unexercised rights. There is no
minimum subscription amount required for consummation of the rights
offering. We will raise no more than $1,500,000 in this
offering.

You
should carefully consider whether to exercise your subscription rights before
the expiration date. All exercises of subscription rights are
irrevocable. Our board of directors is making no recommendation
regarding your exercise of the subscription rights. Investing in our securities involves
a high degree of risk. In addition, your holdings in our company will
be diluted if you do not exercise the full amount of your basic subscription
rights. See “Risk Factors” beginning on page 16 of this
prospectus.

Our
common stock is quoted on the NASDAQ Capital Market under the symbol
“REED.” The last reported sale price of our common stock on May
[ ], 2009 was $[ ] per
share. Our Series B Preferred is not listed for trading on the NASDAQ
Capital Market. The rights are nontransferable.

As
of May [ ], 2009, the aggregate market
value of our outstanding common stock held by non-affiliates was approximately
$[ ],
based on [ ]
shares of outstanding common stock, of which approximately
[ ]
shares are held by non-affiliates, and a per share price of
$[ ]
based on the closing sale price of our common stock
on [ ], 2009. As
of the date hereof, we have not sold any securities pursuant to General
Instruction I.B.6 of Form S-3 during the prior 12 calendar month period that
ends on and includes the date hereof.

SubscriptionPrice

Proceeds,
Before Expenses, to
us

Per
share

$10.00

$10.00

Total
(1)

$1,500,000

$1,500,000

__________________

(1) Assumes
that the rights offering is fully subscribed and that the maximum offering
amount in the aggregate of $1,500,000 is subscribed.

Neither the U.S. Securities and
Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense. The
shares of our Series B Preferred offered hereby and our common stock are not
deposits, savings accounts, or other obligations of a bank or savings
association and are not insured by the FDIC or any other governmental
agency.

Our
principal executive offices are located at 13000 South Spring Street, Los
Angeles, California 90061. Our telephone number is 310-217-9400. If
you have any questions or need further information about this rights offering,
please call MacKenzie Partners, Inc., our information agent for the rights
offering, at (212) 929-5500 (call collect) or (800) 322-2885
(toll-free).

The date of this prospectus is
May , 2009

TABLE
OF CONTENTS

About
This Prospectus

ii

Questions
and Answers About the Rights Offering

1

Prospectus
Summary

9

Special
Note Regarding Forward-Looking Statements

14

Risk
Factors

16

Use
of Proceeds

33

Determination
of Offering Price

33

Capitalization

33

Dilution

34

Description
of Securities to be Registered

35

Interests
of Named Experts and Counsel

39

The
Rights Offering

39

The
Reoffer of Remaining Shares

46

Plan
of Distribution

47

Material
U.S. Federal Home Income Tax Considerations

48

Certain
ERISA Considerations

57

Material
Changes

58

Incorporation
of Certain Information by Reference

58

Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities

59

Where
You Can Find Additional Information

60

ABOUT
THIS PROSPECTUS

Unless
the context otherwise requires, all references to “Reed’s,” “we,” “us,” “our,”
“our company,” or similar language in this prospectus refer to Reed’s, Inc., a
Delaware corporation.

You
should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. For further information,
please see the section of this prospectus entitled “Where You Can Find
Additional Information.” We are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted.

You
should not assume that the information appearing in this prospectus is accurate
as of any date other than the date on the front cover of this prospectus,
regardless of the time of delivery of this prospectus or any sale of a
security. Our business, financial condition, results of operations
and prospects may have changed since those dates.

We
obtained statistical data, market data and other industry data and forecasts
used throughout this prospectus from market research, publicly available
information and industry publications. Industry publications
generally state that they obtain their information from sources that they
believe to be reliable, but they do not guarantee the accuracy and completeness
of the information. Similarly, while we believe that the statistical
data, industry data and forecasts and market research are reliable, we have not
independently verified the data, and we do not make any representation as to the
accuracy of the information. We have not sought the consent of the
sources to refer to their reports appearing in this prospectus.

This
prospectus contains trademarks, tradenames, service marks and service names of
Reed’s, Inc.

The
following are examples of what we anticipate may be common questions about the
rights offering. The answers are based on selected information from this
prospectus. The following questions and answers do not contain all of
the information that may be important to you and may not address all of the
questions that you may have about the rights offering. This
prospectus contains more detailed descriptions of the terms and conditions of
the rights offering and provide additional information about us and our
business, including potential risks related to the rights offering, our common
stock and our business.

Exercising
the rights and investing in our securities involves a high degree of
risk. We urge you to carefully read the section entitled “Risk
Factors” beginning on page 16 of this prospectus and all other information
included in this prospectus in its entirety before you decide whether to
exercise your rights.

Q:

What
is a rights offering?

A:

A
rights offering is a distribution of subscription rights on a pro rata basis to all
existing common stockholders of a company. We are distributing
to holders of our common stock, at no charge, as of the close of business
on the record date
([ ]
2009), up to 10,000,000 subscription rights to purchase up to an aggregate
of 150,000 shares of our Series B Preferred valued, in the aggregate, at
up to $1,500,000. You will receive one subscription right for
every share of common stock you own at the close of business on the record
date. You may purchase one share of our Series B Preferred for
every 66.7 rights granted to you. The subscription rights will be
evidenced by subscription rights certificates, which may be physical
certificates but will more likely be electronic certificates issued
through the facilities of the Depository Trust Company, or
DTC.

Q:

Why are you undertaking the
rights offering?

A:

We
are making the rights offering to raise funds primarily for production of
inventory and marketing, plus for general working capital purposes. We had
approximately $229,000 of available cash and cash equivalents as of
December 31, 2008. If we fail to raise capital by the end
of 2009, we would expect to have to significantly decrease operating
expenses, which will curtail the growth of our business.

Our
board of directors has elected a rights offering over other types of
financings because a rights offering provides our existing stockholders
the opportunity to participate in this offering first, and our board
believes this creates less percentage dilution of stockholder ownership
interest in our company than if we issued shares to new
investors.

Q:

How much money will Reed’s
raise as a result of the rights offering?

A:

Assuming
full participation in the rights offering, we estimate that the net
proceeds from the rights offering will be approximately $1,400,000, after
deducting expenses related to this offering payable by us estimated at
approximately $100,000. We may decide to close the rights
offering and accept such proceeds of the basic subscription rights and
over-subscription rights as we have received as of the expiration date of
the rights offering whether or not they are sufficient to meet the
objectives we state in this prospectus, other corporate milestones that we
may set, or to avoid a “going concern” modification in future reports of
our auditors as to uncertainty with respect to our ability to continue as
a going concern. We will raise no more than $1,500,000 in this
offering. See “Risk Factors — Completion of this offering is
not subject to us raising a minimum offering amount and proceeds may be
insufficient to meet our objectives, thereby increasing the risk to
investors in this offering.”

1

Q:

What is a
right?

A:

Each
right carries with it a basic subscription right and an over-subscription
right. 66.7 rights entitle the holder of the rights the opportunity to
purchase one share of Series B Preferred at the subscription price of
$10.00 per share. Each right will be evidenced by a nontransferable rights
certificate.

Q:

What is a basic subscription
right?

A:

66.7
basic subscription rights gives you the opportunity to purchase one share
of our Series B Preferred. You may exercise any number of your basic
subscription rights or you may choose not to exercise any subscription
rights at all.

For
example, if you own 667 shares of our common stock on the record date and
you are granted one right for every share of our common stock you own at
that time, then you have the right to purchase up to 10 shares of Series B
Preferred, subject to adjustment to eliminate fractional rights. If you
hold your shares in the name of a broker, dealer, custodian bank, trustee
or other nominee who uses the services of the DTC, then DTC will issue one
right to the nominee for every share of our common stock you own at the
record date.

Q:

What is an over-subscription
right?

A:

If
you elect to purchase all of the shares available to you pursuant to your
basic subscription right, you may also concurrently elect to subscribe for
any number of additional shares that may remain unsubscribed as a result
of any other stockholders not exercising their basic subscription rights,
subject to a pro
rata adjustment if over-subscription requests exceed shares, as
more fully described below. The over-subscription rights allow
a holder to subscribe for an additional amount equal to up to 400% of the
shares for which such holder was otherwise entitled to subscribe at the
same exercise price per whole share as a basic subscription
right.

For
example, if you own 667 shares of our common stock on the record date, and
exercise your basic subscription right to purchase all (but not less than
all) 10 shares of Series B Preferred which are available for you to
purchase, then, you may also concurrently exercise
your over-subscription right to purchase up to 40 additional shares of
Series B Preferred that remain unsubscribed as a result of any
other stockholders not exercising their basic subscription rights, subject
to the pro rata
adjustments described below. Accordingly, if your basic and
over-subscription rights are exercised and honored in full, you would
receive a total of 50 shares of Series B Preferred in this
offering. Payments in respect of over-subscription rights are
due at the time payment is made for the basic subscription
right.

Q:

What happens if rights holders
exercise their respective over-subscription rights to purchaseadditional
shares of Series B Preferred?

A:

We
will allocate the remaining available shares pro rata among rights
holders who exercised their respective over-subscription rights, based on
the number of over-subscription shares of Series B Preferred to which they
subscribed. The allocation process will assure that the total number of
remaining shares available for basic and over-subscriptions is distributed
on a pro rata
basis. The percentage of remaining shares of Series B Preferred
each over-subscribing rights holder may acquire will be rounded down to
result in delivery of whole shares.

2

Payments
for basic subscriptions and over-subscriptions will be deposited upon
receipt by the subscription agent and held in a segregated account with
the subscription agent pending a final determination of the number of
shares of Series B Preferred to be issued pursuant to the basic and
over-subscription rights. If the pro rated amount of shares
allocated to you in connection with your basic or over-subscription right
is less than your basic or over-subscription request, then the excess
funds held by the subscription agent on your behalf will be promptly
returned to you without interest or deduction. We will deliver
certificates representing your shares of our Series B Preferred or credit
your account at your nominee holder with shares of our Series B Preferred
that you purchased pursuant to your basic and over-subscription rights as
soon as practicable after the rights offering has expired and all
proration calculations and reductions contemplated by the terms of the
rights offering have been effected.

Q.

Are
there any circumstances in which either Reed’s could be obligated to
distribute over- subscription rights for a number of shares of Series B
Preferred which exceeds its available shares of Series B Preferred? What
would happen in this case?

A:

If
we receive a sufficient number of over-subscriptions, the aggregate number
of exercises could exceed the 150,000 shares of Series B Preferred
authorized and available in this offering for issuance. In such a case, we
would reduce on a pro
rata basis, the number of over-subscriptions we accept so that we
will not become obligated to issue, upon exercise of the
over-subscriptions, a greater number of shares of Series B Preferred than
we have authorized and available for issuance.

Q:

Will
the officers, directors and significant stockholders of Reed’s be
exercising their rights?

A:

Our
officers, directors and greater than 5% beneficial stockholders may
participate in this offering, but none of our officers, directors or
greater than 5% beneficial stockholders are obligated to so
participate.

Q.

Will the subscription rights
and the shares of Series B Preferredthat I receive upon exercise of
my rights be tradable on the NASDAQ Capital
Market?

A:

No.

Q.

How
do I exercise my basic subscription right?

A:

You
may exercise your subscription rights by properly completing and signing
your subscription rights certificate. Your subscription rights
certificate, together with full payment of the subscription price, must be
received by Continental Stock Transfer & Trust Company, the
subscription agent for this rights offering, on or prior to the expiration
date of the rights offering. We sometimes refer to Continental
Stock Transfer & Trust Company in this prospectus as the subscription
agent. Continental Stock Transfer & Trust Company is
not the transfer agent and registrar for our common stock.

If
you use the mail, we recommend that you use insured, registered mail,
return receipt requested. We will not be obligated to honor your exercise
of subscription rights if the subscription agent receives the documents
relating to your exercise after the rights offering expires, regardless of
when you transmitted the
documents.

3

Q:

How
do I exercise my over-subscription
right?

A:

In
order to properly exercise your over-subscription right, you must:
(i) indicate on your subscription rights certificate that you submit
with respect to the exercise of the rights issued to you how many
additional shares of Series B Preferred you are willing to acquire
pursuant to your over-subscription right and (ii) concurrently deliver
the subscription payment related to your over-subscription right at the
time you make payment for your basic subscription right. All
funds from over-subscription rights that are not honored will be promptly
returned to investors, without interest or
deduction.

Q:

Am
I required to subscribe in the rights
offering?

A:

No.

Q:

What
happens if I choose not to exercise my subscription
rights?

A:

If
you do not exercise your basic subscription right in full, the percentage
of our common stock that you own will decrease, and your voting and other
rights will be diluted to the extent that other stockholders exercise
their subscription rights to purchase shares of Series B Preferred and
such Series B Preferred is converted to common stock. We will
we raise no more than $1,500,000 in this
offering.

Q:

When
will the rights offering expire?

A:

The
subscription rights will expire, if not exercised, at 5:00 p.m., New York
City time, on
[ ],
2009, unless we decide to terminate the rights offering earlier or extend
the expiration date for up to an additional 30 trading days in our sole
discretion. If we extend the expiration date, you will have at
least ten trading days during which to exercise your rights. Any rights
not exercised at or before that time will expire without any payment to
the holders of those unexercised rights. See “The Rights Offering —
Expiration Date and Extensions.” The subscription agent must
actually receive all required documents and payments before that time and
date.

Q:

Will
Reed’s be requiring a minimum dollar amount of subscriptions to consummate
the rights offering?

A:

No.
There is no minimum subscription requirement to consummate the rights
offering. As such, proceeds from this rights offering may not
be sufficient to meet the objectives we state in this prospectus, other
corporate milestones that we may set, or to avoid a “going concern”
modification in future reports of our auditors as to uncertainty with
respect to our ability to continue as a going
concern.

Q:

Is
exercising my subscription rights
risky?

A:

The
exercise of your subscription rights and over-subscription rights (and the
resulting ownership of our common stock) involves a high degree of
risk. Exercising your subscription rights means buying shares
of our Series B Preferred and should be considered as carefully as you
would consider any other equity investment. You should
carefully consider the information under the heading “Risk Factors” and
all other information included in this prospectus before deciding to
exercise your subscription
rights.

4

Q:

After
I exercise my subscription rights, can I change my mind and cancel my
purchase?

A:

No. Once
you send in your subscription rights certificate and payment, you cannot
revoke the exercise of either your basic or over-subscription
rights. You should not exercise your subscription rights unless
you are certain that you wish to purchase shares of our Series B Preferred
at the proposed subscription price. Any rights not exercised at
or before that time will expire worthless without any payment to the
holders of those unexercised
rights.

Q:

Can
the board of directors cancel or terminate the rights
offering?

A:

Yes. Our
board of directors may decide to cancel or terminate the rights offering
at any time and for any reason before the expiration date. If
our board of directors cancels or terminates the rights offering, we will
issue a press release notifying stockholders of the cancellation or
termination, and any money received from subscribing stockholders will be
promptly returned, without interest or
deduction.

Q:

What
should I do if I want to participate in the rights offering but my shares
are held in the name of my broker, dealer, custodian bank, trustee or
other nominee?

A:

Beneficial
owners of our shares whose shares are held by a nominee, such as a broker,
dealer custodian bank or trustee, must contact that nominee to exercise
their rights. In that case, the nominee will complete the subscription
rights certificate on behalf of the beneficial owner and arrange for
proper payment by one of the methods described
above.

Q:

What
should I do if I want to participate in the rights offering, but I am a
stockholder with a foreign address?

A:

Subscription
rights certificates will not be mailed to foreign stockholders whose
address of record is outside the United States and Canada, or is an Army
Post Office (APO) address or Fleet Post Office (FPO). If you are a foreign
stockholder, you will be sent written notice of this offering. The
subscription agent will hold your rights, subject to you making
satisfactory arrangements with the subscription agent for the exercise of
your rights, and follow your instructions for the exercise of the rights
if such instructions are received by the subscription agent at or before
11:00 a.m., New York City time, on
[ ] ,
2009, three business days prior to the expiration date (or, if this
offering is extended, on or before three business days prior to the
extended expiration date). If no instructions are received by the
subscription agent by that time, your rights will expire worthless without
any payment to you of those unexercised
rights.

Q:

Will
I be charged a sales commission or a fee if I exercise my subscription
rights?

A:

We
will not charge a brokerage commission or a fee to subscription rights
holders for exercising their subscription rights. However, if you exercise
your rights through a broker or nominee, you will be responsible for any
fees charged by your broker or nominee.

5

Q:

What
is the recommendation of the board of directors regarding the rights
offering?

A:

Neither
we, our board of directors, the information agent nor the subscription
agent are making any recommendation as to whether or not you should
exercise your subscription rights. You are urged to make your decision in
consultation with your own advisors as to whether or not you should
participate in the rights offering or otherwise invest in our securities
and only after considering all of the information included in this
prospectus, including the “Risk Factors” section that
follows.

Q:

How
was the $10.00 per share subscription price
established?

A:

The
subscription price for the shares of Series B Preferred in this offering
was set by our board of directors and, on an as converted basis,
approximates a slight premium to the current trading value of our common
stock as of the date of this prospectus. The subscription price does not
necessarily bear any relationship to the book value of our assets, results
of operations, cash flows, losses, financial condition or any other
established criteria for value. You should not consider the
subscription price as an indication of the value of the Series B
Preferred. After the date of this prospectus, our common stock
traded below the subscription
price.

Q:

What
if my rights result in fractional shares?

A:

You
may not purchase fractional shares of our Series B Preferred. If your
rights would allow you topurchase a fractional share, you may exercise
them only by rounding down to and paying for thenearest whole share, or
paying for any lesser number of whole
shares.

Q:

If
I also own shares of Reed’s Series A Convertible Preferred Stock, will I
receive rights on those shares?

A:

No,
unless you convert one or more shares of your Series A Convertible
Preferred Stock into shares of our common stock
before ,
2009, the record date for this rights offering. If you elect to convert
any or all of your shares of Series A Convertible Preferred Stock, you
would no longer be entitled to dividends or other rights incident to the
shares of Series A Convertible Preferred Stock that you
converted.

Q:

Will
the Series B Preferred be traded on any stock exchange or listed on a
quotation service?

A:

No. There
is no liquid trading market for the Series B
Preferred. Conversion into the underlying shares of our common
stock and sale of those shares may be the only way for you to liquidate
your investment in any shares of Series B Preferred you purchase in the
rights offering.

Q: What
are the terms of the Series B Convertible Preferred Stock?

Each
share of Series B Preferred carries an eight percent (8%) annual
dividend and will have an initial stated value of $10.00 per share.

Conversion
Rights. Each share of the Series B Preferred will be
convertible at the election of the holder into shares of our common stock by
dividing the $10.00 stated value of the Series B Preferred by a conversion
price, which will initially be
$[ ]. The conversion price
will be adjusted to reflect subdivisions or combinations of our common stock
such as stock splits, stock dividends, recapitalizations or reverse
splits.

6

Mandatory
Conversion at Our Option. At any time after the original purchase date,
if the closingprice of our common stock as reported by the principal exchange or
quotation system on which such commonstock is traded or reported equals or
exceeds $[ ] per share of
common stock, then we shall have the right to cause all (but not less than all)
outstanding shares of Series B Preferred Stock to be automatically converted
into shares of common stock.

Mandatory
Redemption. At any time after the second anniversary of the original
purchase date, wemay redeem all, but not less than
all, of the outstanding shares of Series B Preferred at
our sole discretion, ata price equal to the greater of (i) one hundred ten
percent (110%) of the original purchase price, plus an amount equal to any
unpaid and accrued dividends and (ii) the Fair Market Value of such number of
shares of common stock which the holder of the redeemed Series B Preferred would
be entitled to receive had the redeemed Series B Preferred been converted
immediately prior to the redemption.

Voting.
Holders of the Series B Preferred will have no voting rights, except as required
by law.

.

For a
detailed description of the rights, preferences and privileges of the Series B
Preferred , see“Description of Securities to be Registered — the
Series B Convertible Preferred Stock.”

Q:

What
are the U.S. federal income tax consequences of receiving or exercising my
subscription rights?

A:

A
holder should not recognize income or loss for U.S. federal income tax
purposes in connection with the receipt or exercise of subscription rights
in the rights offering. You should consult your own tax advisor as to the
particular consequences to you of the rights offering. See “Material U.S.
Federal Income Tax Considerations.”

Q:

How
many shares of our common stock will be outstanding after the rights
offering?

A:

On
[ ],
2009, the record date for the rights offering, there were
[ ]
shares of common stock outstanding, and completion of the rights offering
will not immediately affect the number of shares of common stock
outstanding. Following completion of the rights offering, (assuming all
shares are purchased including through exercise of over-subscription
rights), there will be 150,000 shares of Series B Preferred outstanding,
which will initially be convertible into
[ ]
shares of common stock. Assuming conversion of all shares of Series B
Preferred, (and excluding
[ ]
shares of common stock underlying currently outstanding options, warrants
and Series A Convertible Preferred Stock), there would be
[ ]
shares of common stock outstanding.

Q:

If I exercise my subscription
rights, when will I receive shares of Series B Preferredpurchased in the rights
offering?

A:

If
your shares are held of record by Cede & Co. or by any other
depository or nominee through the facilities of DTC on your behalf or on
behalf of your broker, dealer, custodian bank, trustee or other nominee,
you will have any shares that you acquire credited to the account of
Cede & Co. or the other depository or nominee. With
respect to all other stockholders, stock certificates for all shares
acquired will be mailed promptly after payment for all the shares
subscribed for has cleared.

7

Q:

Who
is the subscription agent for the rights
offering?

A:

The
subscription agent is Continental Stock Transfer & Trust Company. The
address for delivery to the subscription agent is as
follows:

By
Mail/Commercial Courier/Hand Delivery:

Continental
Stock Transfer & Trust Company

Attn:
Reorganization Department

17
Battery Place, 8th Floor

New York,
NY 10004

Your
delivery to an address other than the address set forth above will not
constitute valid delivery and, accordingly, may be rejected by
us.

Q:

What
should I do if I have other
questions?

A:

If
you have any questions or need further information about this rights
offering, please call

This
summary highlights only selected information contained elsewhere in this
prospectus. It does not contain all of the information that is important to you
before investing in our preferred stock. To understand this offering fully, you
should read the entire prospectus carefully, including the risk factors and
financial statements included or incorporated by reference herein.

About
Reed’s Inc.

We
develop, manufacture, market and sell natural non-alcoholic and “New Age”
beverages, candies and ice creams. “New Age Beverages” is a category
that includes natural soda, fruit juices and fruit drinks, ready-to-drink teas,
sports drinks and water. We currently offer 16 beverages, including
diet beverages, three candies and three ice creams. We sell most of
our products in specialty gourmet and natural food stores, supermarket chains,
retail stores and restaurants in the United States and, to a lesser degree, in
Canada.

We
primarily sell our products through a network of natural, gourmet and
independent distributors. We also maintain an organization of
in-house sales managers who work mainly in the stores serviced by our natural,
gourmet and mainstream distributors and with our distributors. We
also work with regional, independent sales representatives who maintain store
and distributor relationships in a specified territory. In Southern
California, we have in the past maintained our own direct distribution in
addition to other local distributors and are presently in the process of
discontinuing our direct distribution and redirecting our customers to local
distributors.

Our
current business strategy is to maintain our marketing focus in the natural food
marketplace while expanding sales of our products in mainstream markets and
distribution channels.

We
produce certain of our soda products for the western half of the United States
at an 18,000 square foot warehouse facility owned by us in an unincorporated
area of Los Angeles County near downtown Los Angeles, known as The
Brewery.

We also
contract with The Lion Brewery, Inc., a packing, or co-pack, facility
in Pennsylvania, to supply us with soda products for the eastern half of the
United States and nationally for soda products that we do not produce at The
Brewery. Our ice creams are co-packed for us at Ronnybrooke
Dairy in upstate New York on a purchase order basis. We pack our
candy products at the Brewery.

We have
not been profitable during our last two fiscal years and there is no assurance
that we will develop profitable operations in the future. Our net
loss for the years ended December 31, 2008 and 2007 was $3,814,000 and
$5,551,000, respectively. We cannot assure you that we will have
profitable operations in the future.

Our
principal executive offices are at the Brewery, which is located at 13000 South
Spring Street, Los Angeles, California 90061. Our telephone number is
310-217-9400. Our Internet address is www.reedsgingerbrew.com .
Information contained on our website or that is accessible through our website
should not be considered to be part of this prospectus.

We
are distributing at no charge to the holders of our common stock on
[ ],
2009, which we refer to as the record date, 10,000,0000 subscription
rights to purchase up to an aggregate of 150,000 shares of our Series B
Preferred. Each share of Series B Preferred carries an eight
percent (8%) annual dividend and will have an initial stated
value of $10.00 per share, and will be convertible into shares of our
common stock at a conversion ratio of
[ ] shares of common stock for each
share of Series B Preferred held at the time of conversion, representing
an initial conversion price of
$[ ] per share, which is
subject to adjustment.
We expect the total purchase price for the securities offered in
this rights offering to be $1,500,000 assuming full participation in the
rights offering, of which no assurances can be given.

Basic
Subscription Right

We
will distribute one right to the holder of record of every share of common
stock that is held by the holder of record on the record
date. 66.7 rights entitle the holder to purchase one share of
Series B Preferred at the subscription price of $10.00 per share, which we
refer to as the basic subscription right.

Over-Subscription
Right

Holders
who fully exercise their basic subscription rights will be entitled to
subscribe for additional shares that may remain unsubscribed as a result
of any unexercised basic subscription rights, which we refer to as the
over-subscription rights. The over-subscription rights allow a holder to
concurrently subscribe for an additional amount equal to up to 400% of the
shares of Series B Preferred which such holder was otherwise entitled to
subscribe. Oversubscription rights are exercisable at the same
price per whole share as basic subscription rights. Rights may only be
exercised for whole numbers of shares; no fractional shares of Series B
Preferred will be issued in this offering. The percentage of
remaining shares of Series B Preferred each over-subscribing rights holder
may acquire will be rounded down to result in delivery of whole
shares.

Record
Date

Close
of business on
[ ],
2009.

Commencement
Date of Subscription Period

[ ],
2009.

Expiration
Date of Subscription Period

5:00
p.m., New York City time, on
[ ],
2009, unless extended by us as described in this summary below under
“—Extension, termination and cancellation.” Any rights not
exercised at or before that time will have no value and expire without any
payment to the holders of those unexercised rights.

10

Subscription
Price

$10.00 per
share, payable in immediately available funds.

Use
of Proceeds

The
proceeds from the rights offering, less fees and expenses incurred in
connection with the rights offering, will be used primarily for production
of inventory and marketing, as well as for general working capital
purposes.

Nontransferable

The
rights being distributed to the holders are nontransferable.

No
Recommendation

Our
board of directors makes no recommendation to you about whether you should
exercise any rights. You are urged to consult your own
financial advisors in order to make an independent investment decision
about whether to exercise your rights. Please see the section
of this prospectus entitled “Risk Factors” for a discussion of some of the
risks involved in investing in our securities.

No
Minimum Subscription Requirement

There
is no minimum subscription requirement. We will consummate the rights
offering regardless of the amount raised from the exercise of
basic and over-subscription rights by the expiration date.

Maximum
Offering Size

We
will we raise no more than $1,500,000 in this offering.

No
Revocation

If
you exercise any of your basic or over-subscription rights, you will not
be permitted to revoke or change the exercise or request a refund of
monies paid.

U.S. Federal
Income Tax Considerations

A
holder should not recognize income, gain, or loss for U.S. federal income
tax purposes in connection with the receipt or exercise of subscription
rights in the rights offering. You should consult your own tax
advisor as to the particular consequences to you of the rights offering.
For a detailed discussion, see “Material U.S. Federal Income Tax
Considerations.”

Extension,
Termination and

Cancellation

Extension. If the
rights offering is undersubscribed, our board of directors may extend the
expiration date for exercising your subscription rights for up to an
additional 30 trading days in their sole discretion. If we extend the
expiration date, you will have at least ten trading days during which to
exercise your rights. Any extension of this offering will be followed as
promptly as practicable by an announcement, and in no event later than
9:00 a.m., New York City time, on the next business day following the
previously scheduled expiration date.

Termination;
Cancellation. We may cancel or terminate the rights offering at any
time and for any reason prior to the expiration date. Any termination or
cancellation of this offering will be followed as promptly as practicable
by announcement thereof, and in no event later than 9:00 a.m., New York
City time, on the next business day following the termination or
cancellation.

11

Procedure
for Exercising Rights

If
you are the record holder of shares of our common stock, to exercise your
rights you must complete the subscription rights certificate and deliver
it to the subscription agent, Continental Stock Transfer & Trust
Company, together with full payment for all the subscription rights
(pursuant to both the basic subscription right and the over-subscription
right) you elect to exercise. The subscription agent must
receive the proper forms and payments on or before the expiration
date. You may deliver the documents and payments by mail or
commercial courier. If regular mail is used for this purpose,
we recommend using registered mail, properly insured, with return receipt
requested. If you are a beneficial owner of shares of our
common stock, you should instruct your broker, dealer, custodian bank,
trustee or other nominee in accordance with the procedures described in
the section of this prospectus entitled “The Rights Offering—Record Date
Stockholders Whose Shares are Held by a Nominee.”

Subscription
Agent

Continental
Stock Transfer & Trust Company

Information
Agent

MacKenzie
Partners, Inc.

Questions

If
you have any questions or need further information about this rights
offering, please call MacKenzie Partners, Inc., our information agent for
the rights offering, at (212) 929-5500 (call collect) or (800) 322-2885
(toll-free).

Shares
Outstanding on the Record Date

[ ]
shares as of
[ ],
2009 (which excludes outstanding options, warrants and preferred stock
convertible into or exercisable for shares of common stock).

Shares
Outstanding after Completion of the Rights Offering

Up
to
[
] shares of our common stock will be outstanding, assuming full
participation in the rights offering and full conversion of
Series B Preferred Stock into common stock. These amounts exclude
outstanding options, warrants and Series A Convertible Preferred Stock
convertible into or exercisable for shares of common stock.

Issuance
of our Series B Preferred

If
you purchase shares pursuant to the basic or over-subscription right, we
will issue certificates representing the shares of Series B Preferred to
you or DTC on your behalf, as the case may be, promptly after receipt of
payment after payment for all the shares subscribed for has
cleared.

12

Risk
Factors

Investing
in our securities involves a high degree of risk. Stockholders considering
making an investment in our securities should consider the risk factors
described in the section of this prospectus entitled “Risk
Factors.”

Fees and
Expenses

We
will bear the fees and expenses relating to the rights
offering.

Trading
Symbol

Our
common stock is quoted on the NASDAQ Capital Market under the ticker
symbol “REED.”

Distribution
Arrangements

On
or about May , 2009, we will distribute the rights,
subscription rights certificates and copies of this prospectus to the
holders of our common stock on the record date. To the extent we
have shares remaining available (after taking into consideration all
requested over-subscription rights), we will offer those shares to the
public at the $10.00 per share purchase price. The offering to the public
will be made through the best efforts of our officers and directors or
through brokers or dealers registered with the Financial Industry
Regulatory Authority (“FINRA”). See “Plan of
Distribution”.

13

SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS

This
prospectus and the documents incorporated and deemed to be incorporated by
reference herein may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, which we refer to as the Exchange Act. Forward-looking
statements relate to expectations, beliefs, estimates, projections, future plans
and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can identify
forward-looking statements by terms such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “goal,” “objective,” “potential,”
“project,” “should,” “will” and “would” or the negative of these terms or other
comparable terminology.

The
forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us. These beliefs, assumptions and expectations can
change as a result of many possible events or factors, not all of which are
known to us or are within our control. If a change occurs, the performance of
our portfolio and our business, financial condition, liquidity and results of
operations may vary materially from those expressed, anticipated or contemplated
in our forward-looking statements. You should carefully consider these risks
before you invest in our securities, along with the following factors that could
cause actual results to vary from our forward-looking statements:

●

Our
ability to generate sufficient cash flow to support capital expansion
plans and general operating
activities,

Competitive
products and pricing pressures and our ability to gain or maintain our
share of sales in the marketplace,

●

The
introduction of new products,

●

Our
being subject to a broad range of evolving federal, state and local laws
and regulations including those regarding the labeling and safety of food
products, establishing ingredient designations and standards of identity
for certain foods, environmental protections, as well as worker health and
safety. Changes in these laws and regulations could have a
material effect on the way in which we produce and market our products and
could result in increased costs,

●

Changes
in the cost and availability of raw materials and the ability to maintain
our supply arrangements and relationships and procure timely and/or
adequate production of all or any of our
products,

●

Our
ability to penetrate new markets and maintain or expand existing
markets,

The
marketing efforts of distributors of our products, most of whom also
distribute products that are competitive with our
products,

14

●

Decisions
by distributors, grocery chains, specialty chain stores, club stores and
other customers to discontinue carrying all or any of our products that
they are carrying at any time,

●

The
availability and cost of capital to finance our working capital needs and
growth plans,

●

The
effectiveness of our advertising, marketing and promotional
programs,

●

Changes
in product category consumption,

●

Economic
and political changes,

●

Consumer
acceptance of new products, including taste test
comparisons,

●

Possible
recalls of our products, and

●

Our
ability to make suitable arrangements for the co-packing of any of our
products.

Except as
required by law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
events described by our forward-looking statements might not occur. We qualify
any and all of our forward-looking statements by these cautionary factors.
Please keep this cautionary note in mind as you read this prospectus and the
documents incorporated and deemed to be incorporated by reference
herein.

15

RISK
FACTORS

An
investment in our securities is very risky. Our financial condition
is unsound. You should not invest in our securities unless you can
afford to lose your entire investment. You should carefully consider
the risk factors described below, together with all other information in this
prospectus, before making an investment decision.

Risks
Related to the Rights Offering

Your
interest in our company may be diluted as a result of this
offering.

Common
stockholders who do not fully exercise their respective rights should expect
that they will, at the completion of this offering, own a smaller proportional
interest in our company than would otherwise be the case had they fully
exercised their basic subscription rights.

Completion
of this offering is not subject to us raising a minimum offering amount and
therefore proceeds may be insufficient to meet our objectives, thereby
increasing the risk to investors in this offering.

Completion
of this offering is not subject to us raising a minimum offering
amount. As such, proceeds from this rights offering may not be
sufficient to meet the objectives we state in this prospectus, other corporate
milestones that we may set, or to avoid a “going concern” modification in future
reports of our auditors as to uncertainty with respect to our ability to
continue as a going concern. Investors should not rely on the success
of this offering to address our need for funding. If we fail to raise capital by
the end of
[ ]
2009, we would expect to have to significantly decrease operating expenses,
which will curtail the growth of our business.

You
may not revoke your subscription rights exercise and could be committed to
buying shares of preferred stock above the prevailing market value of our common
stock into which the Series BPreferred Stock is convertible.

Once you
exercise your subscription rights, you may not revoke the exercise and cancel
the purchase of the shares in the rights offering. The public trading market
price of our common stock is currently below the price at which shares of Series
B Preferred are convertible into shares of our common stock as of the date of
this prospectus, and could further decline before the subscription rights
expire. If you exercise your subscription rights and, the public trading market
price of our common stock does not increase, you will have committed to buying
shares of our Series B Preferred at a price above the prevailing market value of
our common stock into which the Series B Preferred is convertible.

There is no
active trading market for Series B Preferred and an active trading market is
unlikely to develop.Conversion into
the underlying shares of our common stock and sale of those shares may be the
only way for you to liquidate your investment in any shares of Series B
Preferred

We do not
intend to apply to list the Series B Preferred for trading on the NASDAQ Capital
Market. There is no active trading market for the Series B Preferred and an
active trading market is unlikely to develop. Conversion into the underlying
shares of our common stock and sale of those shares may be the only way for you
to liquidate your investment in any shares of Series B Preferred. The conversion
price of our Series B Preferred is currently above the market price of our
common stock.

16

None
of our officers, directors or significant stockholders are obligated to exercise
their subscription right and, as a result, the offering may be
undersubscribed.

Christopher
J. Reed, our President, Chief Executive Officer and Chairman of the Board
beneficially owns approximately 35% of our common stock. As a group, our
officers and directors beneficially own approximately 35% of our common stock.
None of our officers, directors or significant stockholders are obligated to
participate in this offering. We cannot guarantee you that any of our
officers or directors will exercise their basic or over-subscription rights to
purchase any shares issued in connection with this offering. As a result, the
offering may be undersubscribed and proceeds may not be sufficient to meet the
objectives we state in this prospectus or other corporate milestones that we may
set, or to avoid a “going concern” modification in future reports of our
auditors as to uncertainty with respect to our ability to continue as a going
concern.

If
we terminate this offering for any reason, we will have no obligation other than
to return subscription monies promptly.

We may
decide, in our discretion and for any reason, to cancel or terminate the rights
offering at any time prior to the expiration date. If this offering
is terminated, we will have no obligation with respect to rights that have been
exercised except to return promptly, without interest or deduction, the
subscription monies deposited with the subscription agent. If we
terminate this offering and you have not exercised any rights, such rights will
expire worthless.

The
Series B Preferred is equity and is subordinate to our existing class of Series
A Convertible Preferred Stock as well as existing and future
indebtedness.

The
shares of Series B Preferred are equity interests in Reed’s and do not
constitute indebtedness. As such, the shares of Series B Preferred will rank
junior to all indebtedness and other non-equity claims on Reed’s with respect to
assets available to satisfy claims on Reed’s, including in a liquidation of
Reed’s. In addition, the Series B Preferred ranks junior for the purposes of
dividends and distributions upon liquidation to our existing class of Series A
Convertible Preferred Stock. Further, our board of directors has the ability to
issue additional shares of preferred stock and any future designated series of
preferred stock may be senior to the Series B Preferred for purposes of
dividends and distributions upon liquidation and we would be required to satisfy
those senior liquidation preferences before we would be permitted to make
distributions to holders of our Series B Preferred.

Our
ability to pay dividends is dependent on a number of factors, including
satisfying state law requirements, and we cannot guarantee that we will be in a
position to pay dividends in the future as currently expected.

Unlike
indebtedness, where principal and interest would customarily be payable on
specified due dates, in the case of preferred stock like the Series B
Preferred stock (1) dividends are payable only if, as and when
declared by our board of directors and (2) as a corporation, we are subject to
restrictions on payments of dividends out of lawfully available funds. Further,
even if we are able to pay dividends on our Series B Preferred (which are junior
to our Series A Convertible Preferred Stock and senior to our common stock for
purposes of dividends and distributions), we may be limited, or prohibited, from
paying dividends on our common stock.

The
price of our common stock may fluctuate significantly, and this may make it
difficult for you to resell the Series B Preferred or common stock issuable upon
conversion of the Series B Preferred when you want or at prices you
find attractive.

17

The
trading price of our common stock may fluctuate substantially. The
price of the common stock that will prevail in the market after this offering
may be higher or lower than the subscription price depending on many factors,
some of which are beyond our control and may not be directly related to our
operating performance. These factors include, but are not limited to,
the following:

●

price
and volume fluctuations in the overall stock market from time to time,
including increased volatility due to the worldwide credit and financial
markets crisis;

●

significant
volatility in the market price and trading volume of our securities,
including increased volatility due to the worldwide credit and financial
markets crisis;

●

actual
or anticipated changes or fluctuations in our operating
results;

●

material
announcements by us regarding business performance, financings, mergers
and acquisitions or other
transactions;

●

general
economic conditions and trends;

●

competitive
factors;

●

loss
of key supplier or distribution relationships;
or

●

departures
of key personnel.

Before
converting any Series B Preferred into our common stock, you are not entitled to
any rights with respect to our common stock, but you will be subject to all
changes affecting our common stock.

Before
converting any Series B Preferred into our common stock, you are not entitled to
any rights with respect to our common stock (including, without limitation,
voting rights and rights to receive any dividends or other distributions on our
common stock). You will only be entitled to rights on the common stock if and
when we deliver shares of common stock to you upon conversion of your Series B
Preferred. For example, in the event that an amendment is proposed to our
articles of incorporation or bylaws requiring shareholder approval and the
record date for determining the shareholders of record entitled to vote on the
amendment occurs prior to your becoming a record holder of the shares of common
stock issuable upon conversion, you will not be entitled to vote such shares in
respect of such amendment, although you will nevertheless be subject to any
changes in the powers, preferences or special rights of our common stock made if
such amendment is approved.

The
conversion rate of the Series B Preferred may not be adjusted for all dilutive
events that may adversely affect the common stock issuable upon conversion of
the Series B Preferred.

The
conversion rate of the Series B Preferred is subject to adjustment upon certain
events, including the issuance of dividends or distributions in common stock and
subdivisions and combinations of our common stock as described under
“Description of Securities to Be Registered — Series B Convertible Preferred
Stock—Anti-Dilution Rate Adjustments.” We will not adjust the conversion rate
for other events, including offerings of common stock for cash by us or in
connection with acquisitions. There can be no assurance that an event that
adversely affects the value of the Series B Preferred, but does not result in an
adjustment to the conversion rate, will not occur.

18

There
may be future sales or other dilution of our equity, which may adversely affect
the market price of our common stock.

We are
not restricted from issuing additional common stock or preferred stock,
including any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or any substantially similar
securities. The market price of our common stock could decline as a result of
sales of shares of common stock or similar securities in the market made after
this offering or the perception that such sales could occur.

Each
share of Series B Preferred will be convertible at the option of the holder into
[ ] shares of our common stock, subject
to anti-dilution adjustments. The conversion of some or all of the Series B
Preferred will dilute the ownership interest of our existing common
stockholders. Any sales in the public market of our common stock issuable upon
such conversion could adversely affect prevailing market prices of the
outstanding shares of our common stock.

The
subscription price determined for this offering is not an indication of the
value of our Series B Preferred.

The
subscription price for the shares of Series B Preferred in this offering was set
by our board of directors and, on an as converted basis, approximates a slight
premium to the current trading value of our common stock as of the date of this
prospectus. The subscription price does not necessarily bear any relationship to
the book value of our assets, results of operations, cash flows, losses,
financial condition or any other established criteria for value. You
should not consider the subscription price as an indication of the value of the
Series B Preferred. After the date of this prospectus, our common
stock traded below the subscription price.

We
will have broad discretion in the use of the net proceeds from this offering and
may not use the proceeds effectively.

Although
we plan to use the proceeds of this offering primarily for production of
inventory, marketing and working capital, we will not be restricted to such use
and will have broad discretion in determining how the proceeds of this offering
will be used. Our discretion is not substantially limited by the uses
set forth in this prospectus in the section entitled “Use of
Proceeds.” While our board of directors believes the flexibility in
application of the net proceeds is prudent, the broad discretion it affords
entails increased risks to the investors in this offering. Investors
in this offering have no current basis to evaluate the possible merits or risks
of any application of the net proceeds of this offering. Our
stockholders may not agree with the manner in which we choose to allocate and
spend the net proceeds.

If
you do not act on a timely basis and follow subscription instructions, your
exercise of rights may be rejected.

Holders
of shares of common stock who desire to purchase shares of our Series B
Preferred in this offering must act on a timely basis to ensure that all
required forms and payments are actually received by the subscription agent
prior to 5:00 p.m., New York City time, on the expiration date, unless
extended. If you are a beneficial owner of shares of common stock and
you wish to exercise your rights, you must act promptly to ensure that your
broker, dealer, custodian bank, trustee or other nominee acts for you and that
all required forms and payments are actually received by your broker, dealer,
custodian bank, trustee or other nominee in sufficient time to deliver such
forms and payments to the subscription agent to exercise the rights granted in
this offering that you beneficially own prior to 5:00 p.m., New York City time
on the expiration date, as may be extended. We will not be
responsible if your broker, dealer, custodian bank, trustee or other nominee
fails to ensure that all required forms and payments are actually received by
the subscription agent prior to 5:00 p.m., New York City time, on the expiration
date, as may be extended.

19

If you
fail to complete and sign the required subscription forms, send an incorrect
payment amount, or otherwise fail to follow the subscription procedures that
apply to your exercise in this offering, the subscription agent may, depending
on the circumstances, reject your subscription or accept it only to the extent
of the payment received. Neither we nor the subscription agent
undertakes to contact you concerning an incomplete or incorrect subscription
form or payment, nor are we under any obligation to correct such forms or
payment. We have the sole discretion to determine whether a
subscription exercise properly follows the subscription procedures.

We
cannot guarantee that you will receive any or all of the amount of shares for
which you over-subscribed.

Holders
who fully exercise their basic subscription rights will be entitled to subscribe
for an additional amount of shares equal to up to 400% of the shares for which
such holder was otherwise entitled to subscribe. Over-subscription
rights will be allocated pro
rata among rights holders who over-subscribed, based on the number of
over-subscription shares to which they subscribed. We cannot
guarantee that you will receive any or all of the amount of shares for which you
over-subscribed. If the pro rated amount of shares allocated to you
in connection with your over-subscription right is less than your
over-subscription request, then the excess funds held by the subscription agent
on your behalf will be returned to you promptly without interest or deduction
and we will have no further obligations to you.

If
you make payment of the subscription price by uncertified check, your check may
not clear in sufficient time to enable you to purchase shares in this rights
offering.

Any
uncertified check used to pay for shares to be issued in this rights offering
must clear prior to the expiration date of this rights offering, and the
clearing process may require five or more business days. If you choose to
exercise your subscription rights, in whole or in part, and to pay for shares by
uncertified check and your check has not cleared prior to the expiration date of
this rights offering, you will not have satisfied the conditions to exercise
your subscription rights and will not receive the shares you wish to
purchase.

The
receipt of rights may be treated as a taxable distribution to you.

The
distribution of the rights in this offering should be a non-taxable distribution
under Section 305(a) of the Internal Revenue Code of 1986, as amended (the
“Code”). Please see the discussion on the “Material U.S. Federal
Income Tax Considerations” below. This position is not binding on the
IRS, or the courts, however. If this offering is part of a
“disproportionate distribution” under Section 305 of the Code, your receipt
of rights in this offering may be treated as the receipt of a taxable
distribution to you equal to the fair market value of the rights. Any
such distribution would be treated as dividend income to the extent of our
current and accumulated earnings and profits, if any, with any excess being
treated as a return of capital to the extent thereof and then as capital
gain. Each holder of common stock is urged to consult his, her or its
own tax advisor with respect to the particular tax consequences of this
offering.

20

Risks
Relating to Our Business

We
have a history of operating losses. If we continue to incur operating losses, we
eventually may have insufficient working capital to maintain or expand
operations according to our business plan.

As
December 31, 2008, we had an accumulated deficit of $14,919,000. For the
years ended December 31, 2008 and 2007, we incurred losses from operations
of $3,571,000 and $5,489,000, respectively.

As of
December 31, 2008, we had outstanding borrowings of $1,354,000 under our secured
line of credit agreement with First Capital Western Region LLC.

We
recognize that operating losses negatively impact liquidity and we are working
on decreasing operating losses, while focusing on increasing net sales. We are
currently borrowing near the maximum on our line of credit. We
believe the operations of the Company are running at approximately breakeven,
after adjusting for non-cash expenses. We believe that our current cash position
and lines of credit will be sufficient to enable us to meet our cash needs
through at least December, 2009.

We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable operations at
some point in the future, we eventually may have insufficient working capital to
maintain our operations as we presently intend to conduct them or to fund our
expansion and marketing and product development plans. In addition, our losses
may increase in the future as we expand our manufacturing capabilities and fund
our marketing plans and product development. These losses, among other things,
have had and will continue to have an adverse effect on our working capital,
total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock will decline and there would
be a material adverse effect on our financial condition.

If we
continue to suffer losses from operations, the proceeds from our public offering
and private placement may be insufficient to support our ability to expand our
business operations as rapidly as we would deem necessary at any time, unless we
are able to obtain additional financing. There can be no assurance that we will
be able to obtain such financing on acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to pursue our business objectives and would be required to reduce our level
of operations, including reducing infrastructure, promotions, personnel and
other operating expenses. These events could adversely affect our business,
results of operations and financial condition.

In
addition, some or all of the elements of our expansion plan may have to be
curtailed or delayed unless we are able to find alternative external sources of
working capital. We would need to raise additional funds to respond to business
contingencies, which may include the need to:

●

fund
more rapid expansion,

●

fund
additional marketing expenditures,

●

enhance
our operating infrastructure,

●

respond
to competitive pressures, and

●

acquire
other businesses or engage in other strategic
initiatives.

21

If we
need to raise additional financing to support our operations, we cannot assure
you that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available or if they are not available on
acceptable terms, our ability to fund the growth of our operations, take
advantage of opportunities, develop products or services or otherwise respond to
competitive pressures, could be significantly limited.

We
may not be able to develop successful new beverage products which are important
to our growth.

An
important part of our strategy is to increase our sales through the development
of new beverage products. We cannot assure you that we will be able to continue
to develop, market and distribute future beverage products that will enjoy
market acceptance. The failure to continue to develop new beverage products that
gain market acceptance could have an adverse impact on our growth and materially
adversely affect our financial condition. We may have higher obsolescent product
expense if new products fail to perform as expected due to the need to write off
excess inventory of the new products.

Our
results of operations may be impacted in various ways by the introduction of new
products, even if they are successful, including the following:

●

Sales
of new products could adversely impact sales of existing
products,

●

We
may incur higher cost of goods sold and selling, general and
administrative expenses in the periods when we introduce new products due
to increased costs associated with the introduction and marketing of new
products, most of which are expensed as incurred,
and

●

When
we introduce new platforms and bottle sizes, we may experience increased
freight and logistics costs as our co-packers adjust their facilities for
the new products.

The
beverage business is highly competitive.

The
premium beverage and carbonated soft drink industries are highly competitive.
Many of our competitors have substantially greater financial, marketing,
personnel and other resources than we do. Competitors in the soft drink industry
include bottlers and distributors of nationally advertised and marketed
products, as well as chain store and private label soft drinks. The principal
methods of competition include brand recognition, price and price promotion,
retail space management, service to the retail trade, new product introductions,
packaging changes, distribution methods, and advertising. We also compete for
distributors, shelf space and customers primarily with other premium beverage
companies. As additional competitors enter the field, our market share may fail
to increase or may decrease.

The
growth of our revenues is dependent on acceptance of our products by mainstream
consumers.

We have
dedicated significant resources to introduce our products to the mainstream
consumer. As such, we have increased our sales force and executed agreements
with distributors who, in turn, distribute to mainstream consumers at grocery
stores, club stores and other retailers. If our products are not accepted by the
mainstream consumer, our business could suffer.

We may
not correctly estimate demand for our products. Our ability to estimate demand
for our products is imprecise, particularly with new products, and may be less
precise during periods of rapid growth, particularly in new markets. If we
materially underestimate demand for our products or are unable to secure
sufficient ingredients or raw materials including, but not limited to, glass,
labels, flavors or packing arrangements, we might not be able to satisfy demand
on a short-term basis. Moreover, industry-wide shortages of certain juice
concentrates and sweeteners have been and could, from time to time in the
future, be experienced, which could interfere with and/or delay production of
certain of our products and could have a material adverse effect on our business
and financial results. We do not use hedging agreements or alternative
instruments to manage this risk.

The
loss of our largest customers would substantially reduce revenues.

Our
customers are material to our success. If we are unable to maintain good
relationships with our existing customers, our business could suffer. Unilateral
decisions could be taken by our distributors, and/or convenience chains, grocery
chains, specialty chain stores, club stores and other customers to discontinue
carrying all or any of our products that they are carrying at any time, which
could cause our business to suffer.

A natural
foods distributor, accounted for approximately 32% of our sales for the year
ended December 31, 2008 and 35% of our sales in 2007. One customer
accounted for approximately 14% of our sales for the years ended December 31,
2008 and 2007. As a result of this customer concentration, the loss
of this distributor or this major customer as a retailer would substantially
reduce our revenues unless and until we replaced that source of
revenue.

We depend
in large part on distributors to distribute our beverages and other products.
Most of our outside distributors are not bound by written agreements with us and
may discontinue their relationship with us on short notice. Most distributors
handle a number of competitive products. In addition, our products are a small
part of our distributors’ businesses.

We
continually seek to expand distribution of our products by entering into
distribution arrangements with regional bottlers or other direct store delivery
distributors having established sales, marketing and distribution organizations.
Many of our distributors are affiliated with and manufacture and/or distribute
other soda and non-carbonated brands and other beverage products. In many cases,
such products compete directly with our products.

The
marketing efforts of our distributors are important for our success. If our
brands prove to be less attractive to our existing distributors and/or if we
fail to attract additional distributors, and/or our distributors do not market
and promote our products above the products of our competitors, our business,
financial condition and results of operations could be adversely
affected.

One
distributor accounted for approximately 32% of our sales for the year ended
December 31, 2008 and 35% of our sales in 2007. The loss of this
distributor may adversely affect sales in the short term and alternative
distribution channels may not be found in a timely manner. The loss
of our third-party beverage distributors could impair our operations and
adversely affect our financial performance.

23

Price
fluctuations in, and unavailability of, raw materials and packaging that we use
could adversely affect us.

We do not
enter into hedging arrangements for raw materials. Although the prices of raw
materials that we use have not increased significantly in recent years, our
results of operations would be adversely affected if the price of these raw
materials were to rise and we were unable to pass these costs on to our
customers.

We depend
upon an uninterrupted supply of the ingredients for our products, a significant
portion of which we obtain overseas, principally from China and Brazil. We
obtain almost all of our crystallized ginger from Fiji and our Ginger Chews from
Indonesia. Any decrease in the supply of these ingredients or increase in the
prices of these ingredients as a result of any adverse weather conditions,
pests, crop disease, interruptions of shipment or political considerations,
among other reasons, could substantially increase our costs and adversely affect
our financial performance.

We also
depend upon an uninterrupted supply of packaging materials, such as glass for
our bottles and kegs for our 5 liter party kegs. We obtain our bottles
domestically and our kegs from Europe. Any decrease in supply of these materials
or increase in the prices of the materials, as a result of decreased supply or
increased demand, could substantially increase our costs and adversely affect
our financial performance.

The
loss of any of our co-packers could impair our operations and substantially
reduce our financial results.

We rely
on third parties, called co-packers in our industry, to produce some of our
beverages, to produce our glass bottles and to bottle some of our
beverages. Our co-packing agreement with our principal co-packer
expires on November 1, 2011 and grants Reed’s the option to extend the contract
for an additional one year period. Our co-packing arrangements with
other companies are on a short term basis and such co-packers may discontinue
their relationship with us on short notice. Our co-packing
arrangements expose us to various risks, including:

●

Our
largest co-packer, Lion Brewery, accounted for approximately 75% of our
total case production for the year ended December 31, 2008 and 82% and 72%
of our total case production in 2007 and 2006, respectively.

●

if
any of those co-packers were to terminate our co-packing arrangement or
have difficulties in producing beverages for us, our ability to produce
our beverages would be adversely affected until we were able to make
alternative arrangements, and

●

Our
business reputation would be adversely affected if any of the co-packers
were to produce inferior quality
products.

We
compete in an industry that is brand-conscious, so brand name recognition and
acceptance of our products are critical to our success.

24

Our
business is substantially dependent upon awareness and market acceptance of our
products and brands by our targeted consumers. In addition, our business depends
on acceptance by our independent distributors of our brands as beverage brands
that have the potential to provide incremental sales growth rather than reduce
distributors’ existing beverage sales. Although we believe that we have been
relatively successful towards establishing our brands as recognizable brands in
the New Age beverage industry, it may be too early in the product life cycle of
these brands to determine whether our products and brands will achieve and
maintain satisfactory levels of acceptance by independent distributors and
retail consumers. We believe that the success of our product name brands will
also be substantially dependent upon acceptance of our product name brands.
Accordingly, any failure of our brands to maintain or increase acceptance or
market penetration would likely have a material adverse affect on our revenues
and financial results.

We compete in an industry
characterized by rapid changes in consumer preferences and public perception, so
our ability to continue to market our existing products and develop new products
to satisfy our consumers’ changing preferences will determine our long-term
success.

Consumers
are seeking greater variety in their beverages. Our future success will depend,
in part, upon our continued ability to develop and introduce different and
innovative beverages. In order to retain and expand our market share, we must
continue to develop and introduce different and innovative beverages and be
competitive in the areas of quality and health, although there can be no
assurance of our ability to do so. There is no assurance that consumers will
continue to purchase our products in the future. Additionally, many of our
products are considered premium products and to maintain market share during
recessionary periods, we may have to reduce profit margins, which would
adversely affect our results of operations. In addition, there is increasing
awareness and concern for the health consequences of obesity. This may reduce
demand for our non-diet beverages, which could affect our profitability. Product
lifecycles for some beverage brands and/or products and/or packages may be
limited to a few years before consumers’ preferences change. The beverages we
currently market are in varying stages of their lifecycles and there can be no
assurance that such beverages will become or remain profitable for us. The
beverage industry is subject to changing consumer preferences and shifts in
consumer preferences may adversely affect us if we misjudge such preferences. We
may be unable to achieve volume growth through product and packaging
initiatives. We also may be unable to penetrate new markets. If our revenues
decline, our business, financial condition and results of operations will be
materially and adversely affected.

Our
quarterly operating results may fluctuate significantly because of the
seasonality of our business.

Our
highest revenues occur during the spring and summer, the second and third
quarters of each fiscal year. These seasonality issues may cause our financial
performance to fluctuate. In addition, beverage sales can be adversely affected
by sustained periods of bad weather.

Our business is subject to many
regulations and noncompliance is costly.

The
production, marketing and sale of our unique beverages, including contents,
labels, caps and containers, are subject to the rules and regulations of various
federal, provincial, state and local health agencies. If a regulatory authority
finds that a current or future product or production run is not in compliance
with any of these regulations, we may be fined, or production may be stopped,
thus adversely affecting our financial conditions and operations. Similarly, any
adverse publicity associated with any noncompliance may damage our reputation
and our ability to successfully market our products. Furthermore, the rules and
regulations are subject to change from time to time and while we closely monitor
developments in this area, we have no way of anticipating whether changes in
these rules and regulations will impact our business adversely. Additional or
revised regulatory requirements, whether labeling, environmental, tax or
otherwise, could have a material adverse effect on our financial condition and
results of operations.

25

Rising fuel and freight costs may
have an adverse impact on our sales and earnings.

The
recent volatility in the global oil markets has resulted in rising fuel and
freight prices, which many shipping companies are passing on to their customers.
Our shipping costs, and particularly our fuel expenses, have been increasing and
we expect these costs may continue to increase. Due to the price sensitivity of
our products, we do not anticipate that we will be able to pass all of these
increased costs on to our customers. The increase in fuel and freight costs
could have a material adverse impact on our financial condition.

Our
manufacturing process is not patented.

None of
the manufacturing processes used in producing our products are subject to a
patent or similar intellectual property protection. Our only protection against
a third party using our recipes and processes is confidentiality agreements with
the companies that produce our beverages and with our employees who have
knowledge of such processes. If our competitors develop substantially equivalent
proprietary information or otherwise obtain access to our knowledge, we will
have greater difficulty in competing with them for business, and our market
share could decline.

Other
companies in the beverage industry have experienced product liability litigation
and product recalls arising primarily from defectively manufactured products or
packaging. We maintain product liability insurance insuring our operations from
any claims associated with product liability and we believe that the amount of
this insurance is sufficient to protect us. We do not maintain product recall
insurance. In the event we were to experience additional product liability or
product recall claim, our business operations and financial condition could be
materially and adversely affected.

Our intellectual property rights are
critical to our success, the loss of such rights could materially, adversely
affect our business.

We regard
the protection of our trademarks, trade dress and trade secrets as critical to
our future success. We have registered our trademarks in the United States that
are very important to our business. We also own the copyright in and to portions
of the content on the packaging of our products. We regard our trademarks,
copyrights and similar intellectual property as critical to our success and
attempt to protect such property with registered and common law trademarks and
copyrights, restrictions on disclosure and other actions to prevent
infringement. Product packages, mechanical designs and artwork are important to
our success and we would take action to protect against imitation of our
packaging and trade dress and to protect our trademarks and copyrights, as
necessary. We also rely on a combination of laws and contractual restrictions,
such as confidentiality agreements, to establish and protect our proprietary
rights, trade dress and trade secrets. However, laws and contractual
restrictions may not be sufficient to protect the exclusivity of our
intellectual property rights, trade dress or trade secrets. Furthermore,
enforcing our rights to our intellectual property could involve the expenditure
of significant management and financial resources. There can be no assurance
that other third parties will not infringe or misappropriate our trademarks and
similar proprietary rights. If we lose some or all of our intellectual property
rights, our business may be materially and adversely affected.

26

If
we are not able to retain the full time services of our management team,
including Christopher J. Reed, it will be more difficult for us to manage our
operations and our operating performance could suffer.

Our
business is dependent, to a large extent, upon the services of our management
team, including Christopher J. Reed, our founder, President, Chief Executive
Officer and Chairman of the Board. We depend on our management team, but
especially on Mr. Reed’s creativity and leadership in running or supervising
virtually all aspects of our day-to-day operations. We do not have a written
employment agreement with any member of our management team or Mr. Reed. In
addition, we do not maintain key person life insurance on any of our management
team or Mr. Reed. Therefore, in the event of the loss or unavailability of any
member of the management team to us, there can be no assurance that we would be
able to locate in a timely manner or employ qualified personnel to replace him.
The loss of the services of any member of our management team or our failure to
attract and retain other key personnel over time would jeopardize our ability to
execute our business plan and could have a material adverse effect on our
business, results of operations and financial condition.

We
need to manage our growth and implement and maintain procedures and controls
during a time of rapid expansion in our business.

The cost
of manufacturing and packaging our products was approximately 78% and 85% of our
aggregate revenues in 2008 and 2007, respectively. This gross margin
places pressure upon our cash flow and cash reserves when our sales
increase. If we are to expand our operations, such expansion would
place a significant strain on our management, operational and financial
resources. Such expansion would also require improvements in our
operational, accounting and information systems, procedures and
controls. If we fail to manage this anticipated expansion properly,
it could divert our limited management, cash, personnel, and other resources
from other responsibilities and could adversely affect our financial
performance.

Our
business may be negatively impacted by a slowing economy or by unfavorable
economic conditions or developments in the United States and/or in other
countries in which we operate.

A general
slowdown in the economy in the United States or unfavorable economic conditions
or other developments may result in decreased consumer demand, business
disruption, supply constraints, foreign currency devaluation, inflation or
deflation. A slowdown in the economy or unstable economic conditions in the
United States or in the countries in which we operate could have an adverse
impact on our business results or financial condition. Our foreign sales (except
for Canada) accounted for less than 1.0% of our sales for the years ended
December 31, 2008 and 2007, respectively.

We
have operated without independent directors in the past.

We have
not had two independent directors through a large portion of our history. As a
result, certain material agreements between related parties have not been
negotiated with the oversight of independent directors and were entered into at
the absolute discretion of the majority stockholder, Christopher J.
Reed.

27

Risks
Relating to Our Securities

We
recently conducted a rescission offer for shares issued in our initial public
offering. Although we have completed the rescission offer, we may continue to be
subject to claims related to the circumstances related to the rescission
offer.

From
August 3, 2005 through April 7, 2006, we issued 333,156 shares of our common
stock in connection with our initial public offering. The shares issued in
connection with the initial public offering may have been issued in violation of
either federal or state securities laws, or both, and may be subject to
rescission. In order to address this issue, we made a rescission offer to the
holders of these shares.

Our
rescission covered an aggregate of 333,156 shares of common stock issued in
connection with our initial public offering. These securities represented all of
the shares issued in connection with the initial public offering prior to
October 11, 2006. We offered to rescind the shares of our common stock that were
subject to the rescission offer for an amount equal to the price paid for the
shares plus interest, calculated from the date of the purchase through the date
on which the rescission offer expires, at the applicable statutory interest rate
per year. If our rescission offer had been accepted by all offerees, we would
have been required to make an aggregate payment to the holders of these shares
of up to approximately $1,332,624, plus statutory interest.

On August
12, 2006, we made a rescission offer to all holders of the outstanding shares
that we believe are subject to rescission, pursuant to which we offered to
repurchase these shares then outstanding from the holders. At the expiration of
our rescission offer on September 18, 2006, the rescission offer was accepted by
32 of the offerees to the extent of 28,420 shares for an aggregate of
$118,711.57, including statutory interest. The shares that were tendered for
rescission were agreed to be purchased by others and not from our
funds.

Federal
securities laws do not provide that a rescission offer will terminate a
purchaser’s right to rescind a sale of stock that was not registered as required
or was not otherwise exempt from such registration requirements. Accordingly,
although the rescission offer may have been accepted or rejected by some of the
offerees, we may continue to be liable under federal and state securities laws
for up to an amount equal to the value of all shares of common stock issued in
connection with the initial public offering, plus any statutory interest we may
be required to pay. If it is determined that we offered securities without
properly registering them under federal or state law, or securing an exemption
from registration, regulators could impose monetary fines or other sanctions as
provided under these laws.

There
has been a very limited public trading market for our securities and the market
for our securities, may continue to be limited, and be sporadic and highly
volatile.

There is
currently a limited public market for our common stock. Our common stock was
previously listed for trading on the OTC Bulletin Board (the “OTCBB”) from
January 3, 2007 to November 26, 2007. Since November 27, 2007, our common stock
has been listed for trading on the NASDAQ Capital Market. We cannot assure you
that an active market for our shares will be established or maintained in the
future. Holders of our common stock may, therefore, have difficulty selling
their shares, should they decide to do so. In addition, there can be no
assurances that such markets will continue or that any shares, which may be
purchased, may be sold without incurring a loss. Any such market price of our
shares may not necessarily bear any relationship to our book value, assets, past
operating results, financial condition or any other established criteria of
value, and may not be indicative of the market price for the shares in the
future.

28

In
addition, the market price of our common stock may be volatile, which could
cause the value of our common stock to decline. Securities markets experience
significant price and volume fluctuations. This market volatility, as well as
general economic conditions, could cause the market price of our common stock to
fluctuate substantially. Many factors that are beyond our control may
significantly affect the market price of our shares. These factors
include:

●

price
and volume fluctuations in the stock
markets,

●

changes
in our revenues and earnings or other variations in operating
results,

●

any
shortfall in revenue or increase in losses from levels expected by us or
securities analysts,

●

changes
in regulatory policies or law,

●

operating
performance of companies comparable to us,
and

●

general
economic trends and other external
factors.

Even if
an active market for our common stock is established, stockholders may have to
sell their shares at prices substantially lower than the price they paid for it
or might otherwise receive than if a broad public market existed.

Future
financings could adversely affect common stock ownership interest and rights in
comparison with those of other security holders.

Our board
of directors has the power to issue additional shares of common or preferred
stock without stockholder approval. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
our existing stockholders will be reduced, and these newly issued securities may
have rights, preferences or privileges senior to those of existing
stockholders.

If we
issue any additional common stock or securities convertible into common stock,
such issuance will reduce the proportionate ownership and voting power of each
other stockholder. In addition, such stock issuances might result in a reduction
of the book value of our common stock.

Because
Christopher J. Reed controls a large portion of our stock, he can control the
outcome, or greatly influence the outcome, of all matters on which stockholders
vote.

Christopher
J. Reed, our President, Chief Executive Officer, acting Chief Financial Officer,
and Chairman of the Board owns approximately 35% of our common stock. Therefore,
Mr. Reed will be able to control the outcome, or greatly influence the outcome,
on all matters requiring stockholder approval, including the election of
directors, amendment of our certificate of incorporation, and any merger,
consolidation or sale of all or substantially all of our assets or other
transactions resulting in a change of control of our company. In addition, as
our Chairman and Chief Executive Officer, Mr. Reed has and will continue to have
significant influence over our strategy, technology and other matters. Mr.
Reed’s interests may not always coincide with the interests of other holders of
our common stock.

29

A
substantial number of our shares are available for sale in the public market and
sales of those shares could adversely affect our stock price.

Sales of
a substantial number of shares of common stock into the public market, or the
perception that such sales could occur, could substantially reduce our stock
price in the public market for our common stock, and could impair our ability to
obtain capital through a subsequent financing of our securities. We have
8,979,341 shares of common stock outstanding as of December 31, 2008. Of the
shares of our common stock currently outstanding, 5,628,282 shares are
“restricted securities” under the Securities Act. Some of these “restricted
securities” will be subject to restrictions on the timing, manner, and volume of
sales of such shares.

In
addition, as of December 31, 2008, we had issued and outstanding
options and warrants that may be exercised into 2,570,736 shares of common stock
and 47,121 shares of Series A preferred stock that may be converted into 188,484
shares of common stock. In addition, our outstanding shares of Series A
preferred stock bear a dividend of 5% per year, or approximately $24,000 per
year. We have the option to pay the dividend in shares of our common stock. In
2008 and 2007, we paid the dividend in an aggregate of 10,910 and 3,820 shares
of common stock in each such year, respectively, and anticipate that we will be
obligated to issue at least this many shares annually to the holders of the
Series A preferred stock so long as such shares are issued and
outstanding.

We
identified material weaknesses in our system of internal control over financial
reporting for the fiscal year ended December 31, 2008, which material weaknesses
we believe we have remedied as of the date of this prospectus. If we fail to
maintain an effective system of internal control over financial reporting, we
may not be able to maintain effective disclosure controls and procedures and
accurately report our financial results or prevent fraud.

We are
subject to reporting obligations under the U.S. securities laws. The SEC, as
required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules
requiring every public company to include a management report of such company’s
system of internal control over financial reporting in its annual report, which
contains management’s assessment of the effectiveness of the Company’s system of
internal control over financial reporting. This requirement began to apply to us
beginning with our annual report on Form 10-KSB for the year ended December 31,
2007.

Christopher
J. Reed, our Chief Executive Officer and James Linesch, our Chief Financial
Officer, conducted an evaluation of the effectiveness of the system of internal
control over financial reporting based on the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, our management
concluded that our system of internal control over financial reporting was
ineffective as of December 31, 2008 and 2007. A material weakness, as
defined in standards established by the Public Company Accounting Oversight
Board (United States) is a deficiency in internal control over financial
reporting that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.

Based
upon management’s assessment, we identified the following material weaknesses as
of December 31, 2008:

●

Insufficient
disaster recovery or backup of core business
functions,

●

Lack
of segregation of duties, and

●

Lack
of documented and reviewed system of internal
control

30

With
regard to the identified material weakness, we did not restate any financial
results for any prior periods and believe that the identified material weakness
did not have any material effect on the accuracy of our financial statements
prepared with respect to any prior fiscal period. Despite the identified
weaknesses in our internal control procedures, our Chief Executive Officer and
Chief Financial Officer concluded that, as of December 31, 2008, such disclosure
controls and procedures were effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and accumulated and communicated to our
management, including our Chief Executive Officer and former Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

We are
implementing remediation steps to eliminate these material weaknesses, including
the following:

●

Lack of segregation of
duties. The nature of our business currently and our
staffing complement will not allow complete segregation of duties
typically found in larger companies. However, we have
instituted a variety of review procedures conducted by members of the
management team, which mitigates this weakness. These
management review procedures are designed to detect and correct errors
which may result from a lack of segregation of
duties.

●

Lack of documented and
reviewed system of internal control. We are in the
process of improving the documentation of our internal control
procedures. However, we do not have a formal system of internal
audit. We believe the management review procedures designed to
mitigate our lack of segregation of duties provide adequate review to
mitigate the lack of an internal audit
function.

In the
future, an independent registered public accounting firm will be required to
attest to and report on management’s assessment of the effectiveness of our
system of internal control over financial reporting. Despite our
remediation efforts, our management may conclude that our system of internal
control over our financial reporting is not effective. Moreover, even
if our management concludes that our system of internal control over financial
reporting is effective, our independent registered public accounting firm may
still decline to attest to our management’s assessment or may issue a report
that is qualified if it is not satisfied with our controls or the level at which
our controls are documented, designed, operated, or reviewed, or if it
interprets the relevant requirements differently from us.

Our
reporting obligations as a public company will place a significant strain on our
management, operational, and financial resources and systems for the foreseeable
future. An effective system of internal control, particularly as it relates to
revenue recognition, is necessary for us to produce reliable financial reports
and is important to help prevent fraud. As a result, our failure to achieve and
maintain effective system of internal control over financial reporting could
result in the loss of investor confidence in the reliability of our financial
statements, which in turn could harm our business and negatively impact the
trading price of our stock. Furthermore, we anticipate that we will
incur considerable costs and use significant management time and other resources
in an effort to comply with Section 404 and other requirements of the
Sarbanes-Oxley Act.

31

In the
future, an independent registered public accounting firm will be required to
attest to and report on management’s assessment of the effectiveness of the
Company’s system of internal control over financial reporting. Our management
may conclude that our system of internal control over our financial reporting is
not effective. Moreover, even if our management concludes that our system of
internal control over financial reporting is effective, our independent
registered public accounting firm may still decline to attest to our
management’s assessment or may issue a report that is qualified if it is not
satisfied with our controls or the level at which our controls are documented,
designed, operated, or reviewed, or if it interprets the relevant requirements
differently from us.

Our
reporting obligations as a public company will place a significant strain on our
management, operational, and financial resources and systems for the foreseeable
future. An effective system of internal control, particularly as it relates to
revenue recognition, is necessary for us to produce reliable financial reports
and is important to help prevent fraud. As a result, our failure to achieve and
maintain effective system of internal control over financial reporting could
result in the loss of investor confidence in the reliability of our financial
statements, which in turn could harm our business and negatively impact the
trading price of our stock. Furthermore, we anticipate that we will incur
considerable costs and use significant management time and other resources in an
effort to comply with Section 404 and other requirements of the Sarbanes-Oxley
Act.

Our
certificate of incorporation and by-laws contain provisions that may discourage,
delay or prevent a change in our management team that stockholders may consider
favorable.

Our
certificate of incorporation, our bylaws and Delaware law contain provisions
that may have the effect of preserving our current management, such
as:

●

authorizing
the issuance of “blank check” preferred stock without any need for action
by stockholders; and

●

permitting
stockholder action by written
consent.

These
provisions could allow our board of directors to affect your rights as a
stockholder since our board of directors can make it more difficult for common
stockholders to replace members of the board. Because our board of
directors is responsible for appointing the members of our management team,
these provisions could in turn affect any attempt to replace our current
management team.

Assuming
full participation in the rights offering, we estimate that the net proceeds
from the rights offering will be approximately $1,400,000, after deducting
expenses related to this offering payable by us estimated at approximately
$100,000.

We intend
to use the net proceeds received from the exercise of the rights primarily for
production of inventory and marketing, as well as for general working capital
purposes.

If we
fail to raise capital by the end of 2009, we would expect to have to
significantly decrease operating expenses which will curtail the growth of our
business.

DETERMINATION
OF OFFERING PRICE

The
subscription price for the shares of Series B Preferred in this offering was set
by our board of directors and, on an as converted basis, approximates a slight
premium to the current trading value of our common stock as of the date of this
prospectus. In determining the subscription price, the board of
directors considered, among other things, the following factors:

●

the
historical and current market price of our common
stock;

●

the
fact that holders of rights will have an over-subscription
right;

●

the
terms and expenses of this offering relative to other alternatives for
raising capital,

●

the
size of this offering; and

●

the
general condition of the securities
market.

The
subscription price does not necessarily bear any relationship to the book value
of our assets, results of operations, cash flows, losses, financial condition or
any other established criteria for value. You should not consider the
subscription price as an indication of the value of the Series B
Preferred. After the date of this prospectus, our common stock traded
below the subscription price.

on
a pro forma as adjusted basis to give effect to the sale of maximum of
150,000 shares of our Series B Preferred in this rights offering, assuming
a subscription price of $10.00 per share, and our receipt of the net
proceeds from that sale after deducting estimated offering expenses
payable by us of $100,000.

(1)
Assumes the rights offering is fully subscribed for, of which no assurances can
be given.

DILUTION

Purchasers
of our Series B Preferred in the rights offering will experience an immediate
and substantial dilution of the net tangible book value per share of our common
stock. Our net tangible book value as of December 31, 2008 was approximately
$3,161,000, or $0.35 per share of our common stock (based upon 8,979,341 shares
of our common stock outstanding). Net tangible book value per share is equal to
our total net tangible book value, which is our total tangible assets less our
total liabilities, divided by the number of shares of our outstanding common
stock. Dilution per share equals the difference between the amount per share of
common stock underlying the Series B Preferred paid by purchasers in this rights
offering and the net tangible book value per share of our common stock
immediately after the rights offering.

After
giving effect to our sale of 150,000 shares of Series B Preferred, or
[ ]
shares of common stock issuable upon conversion of the convertible preferred
stock at a public offering price of $[ ] per share, and
after deduction of estimated offering expenses payable by us, our net tangible
book value as of December 31, 2008 would have been approximately
$[ ], or
$[ ] per share of common stock. This
represents an immediate increase of
$[ ] in net tangible book value per
share of common stock to our existing stockholders and an immediate dilution in
net tangible book value of [ ]
per share of common stock to purchasers of units in this offering. The following
table illustrates this per share dilution (assuming a fully subscribed for
rights offering of 150,000 shares of Series B Preferred at the subscription
price of $10.00 per share):

Subscription
price per share of Series B Preferred

$

10.00

Net
tangible book value per share of common stock prior to the rights
offering

$

[ ]

Increase
per share of common stock attributable to the rights
offering

$

[ ]

Pro
forma net tangible book value per share of common stock after the rights
offering

$

[ ]

Dilution
in net tangible book value per share of common stock to
purchasers

The
following is a summary of some of the terms of the Series B Preferred and a
description of our common stock. This summary contains a description of the
material terms of the securities but is not necessarily complete. We refer you
to our certificate of incorporation, certificates of designation of our
preferred stock and by-laws, copies of which are available upon request as
described under “Where You Can Find Additional Information.”

We have
the authority to issue 20,000,000 shares of capital stock, consisting of
19,500,000 shares of common stock, $0.0001 par value per share, and 500,000 of
preferred stock, $10.00 par value per share, which can be issued from time to
time by our board of directors on such terms and conditions as they may
determine. As of the date of this prospectus, there were approximately
[ ]
shares of common stock outstanding, 47,121 shares of Series A
Convertible Preferred Stock outstanding and no shares of Series B
Preferred outstanding.

Series
B Convertible Preferred Stock

General.
We expect to issue 150,000 shares of Series B Preferred in the rights offering
and have designated an aggregate of 150,000 of our preferred shares as Series B
Preferred.

Ranking.
With respect to the payment of dividends and amounts upon liquidation, the
Series B Preferred will rank equally with any other class or series
of our stock that ranks on a par with the Series B Preferred in the payment of
dividends and in the distribution of assets on any dissolution, winding-up and
liquidation of Reed’s, Inc., if any, which we refer to as “Parity
Stock,” will rank senior to our common stock and any other class or
series of our stock over which the Series B Preferred has preference or priority
in the payment of dividends or in the distribution of assets on any dissolution,
winding-up and liquidation of Reed’s Inc., which we refer to as “Junior
Stock,” and will rank junior, in all matters expressly provided, to our
preferred stock designated as Series A Convertible Preferred stock and any class
or series of capital stock of Reed’s, Inc. specifically ranking by its terms
senior to the Series B Preferred “Senior Stock”.

Dividends.
Subject to the prior payment in full of any dividends to which any Senior Stock
is entitled pursuant to the Certificate of Incorporation, the holders of the
Series B Convertible Preferred shall be entitled to receive dividends
payable in cash or in stock, which dividends shall be cumulative and
non-compounding and accrue on a daily basis from the date on which a particular
share of Series B Preferred is issued, at an annual rate equal to eight percent
(8%) of the original purchase price of $10.00.

Conversion
Rights. Each share of the Series B Preferred will be
convertible at the election of the holder into shares of our common stock by
dividing the $10.00 stated value of the Series B Preferred by a conversion
price, which will initially be
$[ ]. The conversion price
will be adjusted to reflect subdivisions or combinations of our common stock
such as stock splits, stock dividends, recapitalizations or reverse
splits.

Mandatory
Conversion at Our Option. At any time after the original purchase date,
if the closing price of our common stock as reported by the principal exchange
or quotation system on which such common stock is traded or reported equals or
exceeds $[ ] per share of
common stock, then we shall have the right to cause all (but not less than all)
outstanding shares of Series B Preferred Stock to be automatically converted
into shares of common stock.

35

Mandatory
Redemption. At any time after the second anniversary of the
original purchase date, we may redeem all, but not less than
all, of the outstanding shares of Series B Preferred at
our sole discretion, at a price equal to the greater of (i) one hundred ten
percent (110%) of the original purchase price, plus an amount equal to any
unpaid and accrued dividends and (ii) the Fair Market Value of such number of
shares of common stock which the holder of the redeemed Series B Preferred would
be entitled to receive had the redeemed Series B Preferred been converted
immediately prior to the redemption.

Voting. Holders of the Series B Preferred
will have no voting rights, except as required by law.

Liquidation. In the event of
any liquidation, dissolution or winding up of Reed’s, whether voluntary or
involuntary, after payment or provision for payment of debts and other
liabilities of Reed’s and all amounts due and owing to the holders of
outstanding shares of Senior Stock, if any, each holder of Series B Preferred,
before any distribution or payment is made upon any Junior Stock, shall be
entitled to receive, out of our assets legally available for distribution to
stockholders, an amount equal to the sum of (A) the original purchase price of
such shares of Series B Preferred plus (B) an amount equal to any unpaid and
accrued dividends thereon up to and including the date of the liquidation event
and (ii) if such share of Series B Preferred were then convertible into common
stock, such amount which the holder of Series B Preferred would be entitled to
receive in connection with a liquidation event if such holder had converted his,
her or its Series B Preferred immediately prior to the occurrence of the
liquidation event.

Anti-Dilution
Rate Adjustment. The conversion rate will
be adjusted, without duplication, if certain events occur:

Adjustments for Subdivisions or
Combinations of Common Stock. In the event the outstanding
shares of common stock shall be subdivided by stock split, stock dividend or
otherwise, into a greater number of shares of common stock, the conversion price
of the Series B Preferred then in effect shall, concurrently with the
effectiveness of such subdivision, be proportionately decreased. In
the event the outstanding shares of common stock shall be combined or
consolidated into a lesser number of shares of common stock, the conversion
price of the Series B Preferred then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.

Adjustments for Non-Cash Dividends
and Other Distributions. In the event Reed’s makes, or fixes a
record date for the determination of holders of common stock entitled to
receive, any distribution (excluding repurchases of securities by the
corporation not made on a pro rata basis) payable in property or in securities
of Reed’s other than shares of common stock, then and in each such event the
holders of Series B Preferred shall receive, at the time of such distribution,
the amount of property or the number of securities of Reed’s that they would
have received had their Series B Preferred been converted into common stock on
the date of such event.

Adjustments for Reorganizations,
Reclassifications or Similar Events. If the common stock shall
be changed into the same or a different number of shares of any other class or
classes of stock or other securities or property, whether by capital
reorganization, reclassification or otherwise, then each share of Series B
Preferred shall thereafter be convertible into the number of shares of stock or
other securities or property to which a holder of the number of shares of common
stock of Reed’s deliverable upon conversion of such shares of Series B Preferred
shall have been entitled upon such reorganization, reclassification or other
event.

36

Common
Stock

Holders
of our common stock are entitled to one vote per share on all matters requiring
a vote of stockholders, including the election of directors.

We are a
Delaware corporation and our certificate of incorporation does not provide for
cumulative voting. However, we may be subject to section 2115 of the
California Corporations Code. Section 2115 provides that, regardless
of a company’s legal domicile, specified provisions of California corporations
law will apply to that company if the company meets requirements relating to its
property, payroll and sales in California and if more than one-half of its
outstanding voting securities are held of record by persons having addresses in
California, and such company is not listed on certain national securities
exchanges or on the NASDAQ National Market. Among other things,
section 2115 may limit our ability to elect a classified board of directors and
requires cumulative voting in the election of directors. Cumulative
voting is a voting scheme which allows minority stockholders a greater
opportunity to have board representation by allowing those stockholders to have
a number of votes equal to the number of directors to be elected multiplied by
the number of votes to which the stockholder’s shares are entitled and to
“cumulate” those votes for one or more director nominees. Generally, cumulative
voting allows minority stockholders the possibility of board representation on a
percentage basis equal to their stock holding, where under straight voting those
stockholders may receive less or no board representation. The Supreme Court of
Delaware has recently ruled, on an issue unrelated to voting for directors, that
section 2115 is an unconstitutional exception to the “internal affairs doctrine”
that requires the law of the incorporating state to govern disputes involving a
corporation’s internal affairs, and is therefore inapplicable to Delaware
corporations. The California Supreme Court has not definitively ruled
on section 2115, although certain lower courts of appeal have upheld section
2115. As a result, there is a conflict as to whether section 2115
applies to Delaware corporations. Pending the resolution of these
conflicts, in the event our shares are not listed on a national exchange, we
will not elect directors by cumulative voting.

Christopher
J. Reed, our President, Chief Executive Officer and Chairman of the board of
directors, holds approximately 35% of our outstanding common stock.
Consequently, Mr. Reed, as our principal stockholder, has the power, and may
continue to have the power, to have significant control over the outcome of any
matter on which the stockholders may vote.

Holders
of our common stock are entitled to receive dividends only if we have funds
legally available and the board of directors declares a
dividend.

Holders
of our common stock do not have any rights to purchase additional shares. This
right is sometimes referred to as a preemptive right.

Upon a
liquidation or dissolution, whether in bankruptcy or otherwise, holders of
common stock rank behind our secured and unsecured debt holders, and behind any
holder of any series of our preferred stock.

Anti-Takeover
Effects of Delaware Law and Our Certificate of Incorporation

Certain
provisions of Delaware law and our certificate of incorporation could make more
difficult the acquisition of us by means of a tender offer or otherwise, and the
removal of incumbent officers and directors. These provisions are expected to
discourage certain types of coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to acquire control of us.

37

Our
Certificate of Incorporation and Bylaws include provisions that allow the board
of directors to issue, without further action by the stockholders, up to 500,000
shares of undesignated preferred stock.

We are
subject to the provisions of Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. In general, Section 203 prohibits a
publicly-held Delaware corporation from engaging under certain circumstances, in
a business combination with an interested stockholder for a period of three
years following the date the person became an interested stockholder
unless:

●

prior
to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested
stockholder.

●

upon
completion of the transaction that resulted in the stockholder becoming an
interested stockholder, the stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding (1) shares owned by persons who are directors and also
officers and (2) shares owned by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer.

●

on
or subsequent to the date of the transaction, the business combination is
approved by the board and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2
/3 % of the outstanding voting stock which is not owned by the interested
stockholder.

Generally,
a business combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder. An
interested stockholder is a person who, together with affiliates and associates,
owns or, within three years prior to the determination of interested stockholder
status, did own 15% or more of a corporation’s outstanding voting securities.
The existence of this provision may have an anti-takeover effect with respect to
transactions our board of directors does not approve in advance. Section 203 may
also discourage attempts that might result in a premium over the market price
for the shares of common stock held by stockholders.

These
provisions of Delaware law and our certificate of incorporation could have the
effect of discouraging others from attempting hostile takeovers and, as a
consequence, they may also inhibit temporary fluctuations in the market price of
our common stock that often result from actual or rumored hostile takeover
attempts. These provisions may also have the effect of preventing changes in our
management. It is possible that these provisions could make it more difficult to
accomplish transactions that stockholders may otherwise deem to be in their best
interests.

Transfer
Agent

Transfer
On-Line, Inc., 317 SW Alder Street, 2nd Floor, Portland, Oregon, 92704 is our
registrar and transfer agent for our common stock. We have engaged Continental
Stock Transfer & Trust Company to act as the subscription agent in
connection with this offering and to act as transfer agent for the rights to be
distributed in this offering.

38

INTERESTS
OF NAMED EXPERTS AND COUNSEL

Weinberg
& Company, P.A., independent registered public accounting firm, has audited
our financial statements included in our Annual Report on Form 10-K
for the year ended December 31, 2008, as set forth in their report, which
is incorporated by reference in the prospectus and elsewhere in this
registration statement. Our financial statements are incorporated by reference
in reliance on Weinberg & Company, P.A.’s report, given on their authority
as experts in accounting and auditing. The validity of the shares of Series B
Preferred offered hereby has been passed upon for us by Ruba Qashu, Esq., Corona
Del Mar, California. None of these experts have been employed by us
on a contingent basis with respect to the sale or registration under this
prospectus of the securities.

THE
RIGHTS OFFERING

Terms
of the Offer

We are
distributing at no charge to the holders of our common stock on
[ ],
2009, subscription rights to purchase up to an aggregate of 150,000 shares of
our Series B Preferred. We expect the total purchase price for the securities
offered in this rights offering to be $1,500,000, assuming full participation in
the rights offering. See below for additional information regarding
subscription by DTC participants.

Each
record date stockholder is being issued one right for every share of our Series
B Preferred owned on the record date. Each right carries with it a basic
subscription right and an over-subscription right.

66.7
rights entitle the holder to purchase one share of Series B Preferred at
the subscription price of $10.00 per share, which we refer to as the basic
subscription right.

Holders
who fully exercise their basic subscription rights will be entitled to subscribe
for additional shares of Series B Preferred that remain unsubscribed as a result
of any unexercised basic subscription rights, which we refer to as the
over-subscription right. The over-subscription right allows a holder to
subscribe for an additional amount equal to up to 400% of the shares for which
such holder was otherwise entitled to subscribe. Over-subscription rights are
exercisable at the same price per whole share as basic subscription rights.
Over-subscription rights will be allocated pro rata among rights holders
who over-subscribed, based on the number of over-subscription shares to which
they subscribed. Rights may only be exercised for whole numbers of shares; no
fractional shares of Series B Preferred will be issued in this offering. The
percentage of remaining shares each over-subscribing rights holder may acquire
will be rounded down to result in delivery of whole shares. You must exercise
your rights with respect to the basic subscription right and the
over-subscription right at the same time.

Rights
may be exercised at any time during the subscription period, which commences on
[ ] ,
2009 and ends at 5:00 p.m., New York City time, on
[ ],
2009, the expiration date, unless extended by us for up to an additional 30
trading days, in our sole discretion.

The
rights will be evidenced by subscription rights certificates which will be
mailed to stockholders, except as discussed below under “Foreign Stockholders.”
The subscription rights are nontransferable.

For
purposes of determining the number of shares a rights holder may acquire in this
offering, brokers, dealers, custodian banks, trust companies or others whose
shares are held of record by Cede & Co. or by any other depository or
nominee will be deemed to be the holders of the rights that are issued to Cede
or the other depository or nominee on their behalf.

There is
no minimum subscription amount. We will we not raise more than
$1,500,000 in this offering.

39

Allocation
and Exercise of Over-Subscription Rights

In order
to properly exercise an over-subscription right, a rights holder must:
(i) indicate on its subscription rights certificate that it submits with
respect to the exercise of the rights issued to it how many additional shares it
is willing to acquire pursuant to its over-subscription right and
(ii) concurrently
deliver the subscription payment related to your over-subscription right at the
time you make payment for your basic subscription right.

If there
are sufficient remaining shares, all over-subscription requests will be honored
in full. If requests for shares pursuant to the over-subscription right exceed
the remaining shares available, the available remaining shares will be allocated
pro rata among rights
holders who over-subscribe based on the number of over-subscription shares to
which they subscribe. The percentage of remaining shares each over-subscribing
rights holder may acquire will be rounded down to result in delivery of whole
shares. The allocation process will assure that the total number of remaining
shares available for over-subscriptions is distributed on a pro rata
basis. The formula to be used in allocating the available excess
shares is as follows:

Number
of Over-Subscription Shares

Subscribed
to by Exercising Rights Holder

X

Shares Available
for

Rights
Holders Exercising

Their
Over-Subscription Right

Total
Number of Over-Subscription Shares

Available
for Rights Holders Exercising Their Over-Subscription
Right

Rights
payments for basic subscriptions and over-subscriptions will be deposited upon
receipt by the subscription agent and held in a segregated account with the
subscription agent pending a final determination of the number of shares to be
issued pursuant to the over-subscription right. If the pro rated amount of
shares allocated to you in connection with your over-subscription right is less
than your over-subscription request, then the excess funds held by the
subscription agent on your behalf will be returned to you promptly without
interest or deduction. We will deliver certificates representing your
shares of our Series B Preferred or credit your account at your nominee holder
with shares of our Series B Preferred that you purchased pursuant to your
over-subscription right as soon as practicable after the rights offering has
expired and all proration calculations and reductions contemplated by the terms
of the rights offering have been effected.

Brokers,
dealers, custodian banks, trust companies and other nominee holders of rights
will be required to certify to the subscription agent, before any
over-subscription right may be exercised with respect to any particular
beneficial owner, as to the aggregate number of rights exercised pursuant to the
basic subscription right and the number of shares subscribed for pursuant to the
over-subscription right by such beneficial owner.

We will
not offer or sell in connection with this offering any shares that are not
subscribed for pursuant to the basic subscription right or the over-subscription
right.

40

Pro
Rata Allocation if Insufficient Shares are Available for Issuance

If we
receive a sufficient number of subscriptions, the aggregate dollar amount of the
exercises could exceed the maximum dollar amount of this offering. In each case,
we would reduce on a pro
rata basis, the number of subscriptions we accept so that: (i) we
will not become obligated to issue, upon exercise of the subscriptions, a
greater number of shares of Series B Preferred than we have authorized and
available for issuance and (ii) the gross proceeds of this offering will
not exceed the maximum dollar amount of this offering. In the event of any pro rata reduction, we would
first reduce over-subscriptions prior to reducing basic
subscriptions.

Expiration
of the Rights Offering and Extensions, Amendments, and Termination

Expiration and Extensions.
You may exercise your subscription rights at any time before 5:00 p.m., New York
City time,
on [ ] ,
2009, the expiration date of the rights offering, unless extended. If the rights
offering is undersubscribed, our board of directors may extend the expiration
date for exercising your subscription rights for up to an additional 30 trading
days, in their sole discretion. If we extend the expiration date, you will have
at least ten trading days during which to exercise your rights. Any extension of
this offering will be followed as promptly as practicable by an announcement,
and in no event later than 9:00 a.m., New York City time, on the next business
day following the previously scheduled expiration date.

We may
choose to extend the expiration date of the rights in order to give investors
more time to exercise their subscription rights in the rights offering. We may
extend the expiration date of the rights offering by giving oral or written
notice to the subscription agent and information agent on or before the
scheduled expiration date. If we elect to extend the expiration date, we will
issue a press release announcing such extension no later than 9:00 a.m., New
York City time, on the next business day after the most recently announced
expiration date.

Any
rights not exercised at or before that time will have no value and expire
without any payment to the holders of those unexercised rights. We will not be
obligated to honor your exercise of subscription rights if the subscription
agent receives the documents relating to your exercise after the rights offering
expires, regardless of when you transmitted the documents.

Termination; Cancellation. We
may cancel or terminate the rights offering at any time prior to the expiration
date. Any cancellation or termination of this offering will be followed as
promptly as practicable by an announcement or termination.

Waiver
of Maximum Offering Amount

We may
waive the maximum offering amount in our sole discretion. If we elect to waive
the maximum offering amount, we will issue a press release announcing such
waiver no later than 9:00 a.m., New York City time, on the next business day
after the maximum offering amount has been subscribed.

.

Reasons
for the Rights Offering; Determination of the Offering Price

We are
making the rights offering to raise funds for production of inventory, as well
as for general working capital purposes. Prior to approving the
rights offering, our board of directors carefully considered current market
conditions and financing opportunities, as well as the potential dilution of the
ownership percentage of the existing holders of our common stock that may be
caused by the rights offering.

41

After
weighing the factors discussed above and the effect of the $1,500,000 in
additional capital, before expenses, that may be generated by the sale of shares
pursuant to the rights offering, our board of directors believes that the rights
offering is in the best interests of our company. As described in the
section of this prospectus entitled “Use of Proceeds,” the proceeds from the
rights offering, less fees and expenses incurred in connection with this
offering, will be used for production of inventory, as well as for general
working capital purposes. Although we believe that the rights
offering will strengthen our financial condition, our board of directors is not
making any recommendation as to whether you should exercise your subscription
rights.

The
subscription price per share for the rights offering was set by our board of
directors. In determining the subscription price, the board of
directors considered, among other things, the following factors:

●

the
historical and current market price of our common
stock;

●

the
fact that holders of rights will have an over-subscription
right;

●

the
terms and expenses of this offering relative to other alternatives for
raising capital,

●

the
size of this offering; and

●

the
general condition of the securities
market.

Information
Agent

MacKenzie
Partners, Inc. will act as the information agent in connection with this
offering. The information agent will receive for its services a fee estimated to
be approximately
$[ ]
plus reimbursement of all reasonable out-of-pocket expenses related to this
offering. The information agent can be contacted at the address
below:

MacKenzie
Partners, Inc.

105
Madison Avenue

New York,
NY 10016

Collect:
(212) 929-5500

Toll-free:
(800) 322-2885

Email:
rightsoffering@mackenziepartners.com

Subscription
Agent

Continental
Stock Transfer & Trust Company will act as the subscription agent in
connection with this offering. The subscription agent will receive for its
administrative, processing, invoicing and other services a fee estimated to be
approximately
$[ ]
plus reimbursement for all reasonable out-of-pocket expenses related to this
offering.

Completed
subscription rights certificates must be sent together with full payment of the
subscription price for all shares subscribed for through the exercise of the
subscription right and the over-subscription right to the subscription agent by
one of the methods described below.

42

We will
accept only properly completed and duly executed subscription rights
certificates actually received at any of the addresses listed below, at or prior
to 5:00 p.m., New York City time, on the expiration date of this offering. See
“Payment for Shares” below. In this prospectus, close of business means 5:00
p.m., New York City time, on the relevant date.

Subscription
Rights Certificate Delivery
Method

Address/Number

By
Mail/Commercial Courier/Hand Delivery:

Continental
Stock Transfer & Trust Company

17
Battery Place, 8th Floor

New
York, NY 10004

(212)
509-4000, x 536

Delivery
to an address other than the address listed above will not constitute valid
delivery and, accordingly, may be rejected by us.

Any
questions or requests for assistance concerning the method of subscribing for
shares or for additional copies of this prospectus or subscription rights
certificates may be directed to the subscription agent at its telephone number
and address listed below:

Continental
Stock Transfer & Trust Company

Attn:
[____________]

17
Battery Place, 8th Floor

New York,
NY 10004

(212)
509-4000, x 536

Stockholders
may also contact their broker, dealer, custodian bank, trustee or other nominee
for information with respect to this offering.

Methods
for Exercising Rights

Rights
are evidenced by subscription rights certificates that, except as described
below under “Foreign Stockholders,” will be mailed to record date stockholders
or, if a record date stockholder’s shares are held by a depository or nominee on
his, her or its behalf, to such depository or nominee. Rights may be exercised
by completing and signing the subscription rights certificate that accompanies
this prospectus and mailing it in the envelope provided, or otherwise delivering
the completed and duly executed subscription rights certificate to the
subscription agent, together with payment in full for the shares at the
subscription price by the expiration date of this offering. Completed
subscription rights certificates and related payments must be received by the
subscription agent prior to 5:00 p.m., New York City time, on or before the
expiration date, at the offices of the subscription agent at the address set
forth above.

Exercise
of the Over-Subscription Right

Rights
holders who fully exercise all basic subscription rights issued to them may
participate in the over-subscription right by indicating on their subscription
rights certificate the number of shares they are willing to acquire. If
sufficient remaining shares are available after the basic subscription, all
over-subscriptions will be honored in full; otherwise, remaining shares will be
allocated on a pro rata
basis as described under “Allocation of Over-Subscription Right”
above.

43

Record
Date Stockholders Whose Shares are Held by a Nominee

Record
date stockholders whose shares are held by a nominee, such as a broker, dealer,
custodian bank, trustee or other nominee, must contact that nominee to exercise
their rights. In that case, the nominee will complete the subscription rights
certificate on behalf of the record date stockholder and arrange for proper
payment by one of the methods set forth under “Payment for Shares”
below.

Nominees

Nominees,
such as brokers, dealers, custodian banks, trustees or depositories for
securities, who hold shares for the account of others, should notify the
respective beneficial owners of the shares as soon as possible to ascertain the
beneficial owners’ intentions and to obtain instructions with respect to the
rights. If the beneficial owner so instructs, the nominee should complete the
subscription rights certificate and submit it to the subscription agent with the
proper payment as described under “Payment for Shares” below.

General

All
questions as to the validity, form, eligibility (including times of receipt and
matters pertaining to beneficial ownership) and the acceptance of subscription
forms and the subscription price will be determined by us, which determinations
will be final and binding. No alternative, conditional or contingent
subscriptions will be accepted. We reserve the right to reject any or all
subscriptions not properly submitted or the acceptance of which would, in the
opinion of our counsel, be unlawful.

We
reserve the right to reject any exercise if such exercise is not in accordance
with the terms of this rights offering or not in proper form or if the
acceptance thereof or the issuance of shares of our Series B Preferred thereto
could be deemed unlawful. We reserve the right to waive any deficiency or
irregularity with respect to any subscription rights certificate. Subscriptions
will not be deemed to have been received or accepted until all irregularities
have been waived or cured within such time as we determine in our sole
discretion. We will not be under any duty to give notification of any defect or
irregularity in connection with the submission of subscription rights
certificates or incur any liability for failure to give such
notification.

Rights
are Nontransferable

The
subscription rights are nontransferable.

Foreign
Stockholders

Subscription
rights certificates will not be mailed to foreign stockholders. A foreign
stockholder is any record holder of common stock on the record date whose
address of record is outside the United States and Canada, or is an Army Post
Office (APO) address or Fleet Post Office (FPO) address. Foreign stockholders
will be sent written notice of this offering. The subscription agent will hold
the rights to which those subscription rights certificates relate for these
stockholders’ accounts, subject to that stockholder making satisfactory
arrangements with the subscription agent for the exercise of the rights, and
follow the instructions of such stockholder for the exercise of the rights if
such instructions are received by the subscription agent at or before
[ ], New York City time, on
[ ] ,
2009, three business days prior to the expiration date (or, if this offering is
extended, on or before three business days prior to the extended expiration
date). If no instructions are received by the subscription agent by that time,
the rights will expire worthless without any payment to the holders of those
unexercised rights.

44

Payment
for Shares

A
participating rights holder may send the subscription rights certificate
together with payment for the shares acquired in the subscription right and any
additional shares subscribed for pursuant to the over-subscription right to the
subscription agent based on the subscription price of $10.00 per share. To be
accepted, the payment, together with a properly completed and executed
subscription rights certificate, must be received by the subscription agent at
one of the subscription agent’s offices set forth above (see “—Subscription
Agent”), at or prior to 5:00 p.m., New York City time, on the expiration
date.

All
payments by a participating rights holder must be in U.S. dollars by money order
or check or bank draft drawn on a bank or branch located in the U.S. and payable
to
[ ].
Payment also may be made by wire transfer to [
] , ABA
No. [ ],
Account No.
[ ],
[ ]
for benefit of (FBO) Reed’s, Inc., with reference to the rights holder’s name.
The subscription agent will deposit all funds received by it prior to the final
payment date into a segregated account pending pro-ration and distribution of
the shares.

The
method of delivery of subscription rights certificates and payment of the
subscription price to us will be at the election and risk of the participating
rights holders, but if sent by mail it is recommended that such certificates and
payments be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the subscription agent and clearance of payment prior to 5:00 p.m., New York
City time, on the expiration date. Because uncertified personal checks may take
at least five business days to clear, you are strongly urged to pay, or arrange
for payment, by means of certified or cashier’s check or money
order.

Whichever
of the methods described above is used, issuance of the shares purchased is
subject to collection of checks and actual payment.

If a
participating rights holder who subscribes for shares as part of the
subscription right or over-subscription right does not make payment of any
amounts due by the expiration date, the subscription agent reserves the right to
take any or all of the following actions: (i) reallocate the shares to
other participating rights holders in accordance with the over-subscription
right; (ii) apply any payment actually received by it from the
participating rights holder toward the purchase of the greatest whole number of
shares which could be acquired by such participating rights holder upon exercise
of the basic subscription any over-subscription right; and/or
(iii) exercise any and all other rights or remedies to which it may be
entitled, including the right to set off against payments actually received by
it with respect to such subscribed for shares.

All
questions concerning the timeliness, validity, form and eligibility of any
exercise of rights will be determined by us, whose determinations will be final
and binding. We, in our sole discretion, may waive any defect or irregularity,
or permit a defect or irregularity to be corrected within such time as we may
determine, or reject the purported exercise of any right. Subscriptions will not
be deemed to have been received or accepted until all irregularities have been
waived or cured within such time as we determine in our sole discretion. The
subscription agent will not be under any duty to give notification of any defect
or irregularity in connection with the submission of subscription rights
certificates or incur any liability for failure to give such
notification.

Participating
rights holders will have no right to rescind their subscription after receipt of
their payment for shares.

45

Delivery
of Stock Certificates

Stockholders
whose shares are held of record by Cede & Co. or by any other depository or
nominee on their behalf or on behalf of their broker, dealer, custodian bank,
trustee or other nominee will have any shares that they acquire credited to the
account of Cede & Co. or the other depository or nominee. With
respect to all other stockholders, stock certificates for all shares acquired
will be mailed promptly after payment for all the shares subscribed for has
cleared.

Distribution
Arrangements

We do not
currently have any distribution arrangements with any brokers, dealers,
placement agents or underwriters with regards to the rights
offering. If we enter into any such arrangements, the terms of the
arrangements will be reflected in a prospectus supplement.

Agents,
underwriters and other third parties described above may be entitled to
indemnification by us or any selling stockholder against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution from us with respect to payments which the agents, underwriters or
other third parties may be required to make in respect thereof.

We will
permit prospective investors who are not shareholders eligible to participate in
the rights offering and who desire to purchase shares of our Series B Preferred
the right to submit nonbinding subscriptions with respect to one or more shares
of the Series B Preferred. Prospective investors who wish to do so should
complete, date, and sign the preliminary subscription agreement which
accompanies this prospectus and return it to Reed’s, Inc., 13000 South Spring
Street, Los Angeles, California 90061, attention: Christopher J.
Reed.

Preliminary
subscriptions are NOT binding on subscribers. Do NOT send payment for your
shares at this time. Upon the completion of our rights offering, we will furnish
a prospectus supplement that sets forth the results of our rights offering and
the amount of unsubscribed shares accompanied by an acknowledgment of
subscription to all subscribers. A copy of the acknowledgment of subscription
accompanies this prospectus. Upon receipt of the prospectus supplement, each
subscriber will be asked to do the following:

●

Complete,
date, and sign the acknowledgment of subscription.

●

Make
a check payable to “Reed’s, Inc.” in an amount equal to the subscription
price of $10.00 times the number of shares of Series B Preferred
subscribed for.

UPON
RECEIPT BY REED’S OF THE ACKNOWLEDGMENT OF SUBSCRIPTION, THE PRELIMINARY
SUBSCRIPTION AGREEMENT WILL BECOME BINDING ON AND IRREVOCABLE BY THE SUBSCRIBER
UNTIL THE EXPIRATION DATE OF THE REOFFER PERIOD.

46

Expiration
Date

The
reoffer period will expire at the earlier
of [ ]
p.m., New York City time, on
[ ],
2009 or the date on which we have accepted subscriptions for all shares
remaining for purchase as reflected in the prospectus supplement. We refer to
this date as the “Reoffer Expiration Date.”

Discretion
To Accept Subscriptions

We have
the right, in our sole discretion, to accept or reject any subscription in whole
or in part on or before the Reoffer Expiration Date. If we receive subscriptions
for a total of more than that number of shares of Series B Preferred available
for sale in the reoffer period, we may limit the number of shares sold to any
subscriber. As a result, you may not receive any or all of the shares for which
you subscribe.

We will
notify subscribers no later than ten days after the expiration date as to
whether and to what extent their subscriptions have been accepted. If we do not
accept all or a portion of a subscription, we will return to the subscriber the
unaccepted portion of the subscription funds, without interest.

Issuance
of Stock Certificates

Promptly
after the acceptance of a subscription, we will issue stock certificates
representing the shares of Series B Preferred purchased by investors in the
reoffer period. We will follow the instructions contained in the accepted
Subscription Agreements when we issue the stock certificates.

Subscription
Proceeds

We will
promptly deposit all subscription proceeds as we receive them in a
noninterest-bearing deposit account with
[ ].
Upon our acceptance of a subscription, the related subscription proceeds due to
us will become immediately available for our use. Promptly following the Reoffer
Expiration Date, we will refund any amounts due to subscribers whose
subscriptions we did not accept as described under “—Discretion to Accept
Subscriptions” above.

PLAN
OF DISTRIBUTION

On or
about May , 2009, we will distribute the rights,
subscription rights certificates and copies of this prospectus to the holders of
our common stock on the record date. Rights holders who wish to exercise their
rights and purchase shares of our Series B Preferred must complete the rights
certificate and return it with payment for the shares to the subscription agent
at the following address:

Continental
Stock Transfer & Trust Company

Attn:
Reorganization Department

17
Battery Place, 8th Floor

New York,
NY 10004

See “The
Rights Offering — Method of Exercising Rights.” If you have any questions, you
should contact Continental Stock Transfer & Trust Company.

47

We do not
currently have any distribution arrangements with any brokers, dealers,
placement agents or underwriters with regards to the rights
offering. If we enter into any such arrangements, the terms of the
arrangements will be reflected in a prospectus supplement.

To the
extent we have shares remaining available (after taking into consideration all
requested over-subscription rights), we will offer those shares to the public at
the $10.00 per share purchase price. The offering to the public will be made
through the best efforts of our officers and directors or through brokers or
dealers registered with the Financial Industry Regulatory Authority
(“FINRA”). The offering to the public will not be underwritten. Our
officers and directors will not receive any commissions or other compensation
for soliciting sales of the Series B Preferred, but they will be reimbursed for
reasonable expenses they incur in the offering. There are no present
arrangements or agreements with any brokers or dealers with respect to this
offering. We will name any such agents involved in the offer or sale of these
securities and will list commissions payable by us to these agents in a
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of its appointment, unless stated otherwise in
the applicable prospectus supplement.

Broker or
dealers may be entitled to indemnification by us or any selling stockholder
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or to contribution from us with respect to payments which the
agents, underwriters or other third parties may be required to make in respect
thereof.

We do not
know of any existing agreements between any stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the underlying
Series B Preferred.

MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS

The
following discussion is a summary of the material federal income tax
consequences of the rights offering to holders of common stock that hold such
stock as a capital asset for federal income tax purposes. This discussion is
based on laws, regulations, rulings and decisions in effect on the date of this
prospectus, all of which are subject to change (possibly with retroactive
effect) and to differing interpretations. This discussion applies only to
holders that are U.S. persons, which is defined as a citizen or resident of the
United States, a domestic partnership, a domestic corporation, any estate the
income of which is subject to U.S. federal income tax regardless of its source,
and any trust so long as a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.

This
discussion does not address all aspects of federal income taxation that may be
relevant to holders in light of their particular circumstances or to holders who
may be subject to special tax treatment under the Internal Revenue Code of 1986,
as amended, including, but not limited to, holders who are subject to the
alternative minimum tax, holders who are dealers in securities or foreign
currency, foreign persons (defined as all persons other than U.S. persons), U.S.
holders that have a principal place of business or “tax home” outside the U.S.,
any entity treated as a partnership for U.S. federal income tax purposes,
insurance companies, tax-exempt organizations, banks, financial institutions,
broker-dealers, holders who hold common stock as part of a hedge, straddle,
conversion or other risk reduction transaction, or who acquired common stock
pursuant to the exercise of compensatory stock options or warrants or otherwise
as compensation.

48

We have
not sought, and will not seek, an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax consequences of the
rights offering or the related share issuances. The IRS could take positions
concerning the tax consequences of the rights offering or the related share
issuances that are different from those described in this discussion and, if
litigated, a court could sustain any such positions taken by the IRS. In
addition, the following summary does not address the tax consequences of the
rights offering or the related share issuances under foreign, state, or local
tax laws.

THIS
SUMMARY IS ONLY A GENERAL DISCUSSION AND IS NOT INTENDED TO BE, AND SHOULD NOT
BE CONSTRUED TO BE, LEGAL, OR TAX ADVICE. THE U.S. FEDERAL INCOME TAX TREATMENT
OF THE RIGHTS IS COMPLEX AND POTENTIALLY UNFAVORABLE TO U.S. HOLDERS.
ACCORDINGLY, EACH U.S. HOLDER WHO ACQUIRES RIGHTS IS STRONGLY URGED TO CONSULT
HIS, HER OR ITS OWN TAX ADVISER WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL
AND FOREIGN INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF THE ACQUISITION OF THE
RIGHTS, WITH SPECIFIC REFERENCE TO SUCH PERSON’S PARTICULAR FACTS AND
CIRCUMSTANCES.

THE
FEDERAL TAX DISCUSSION CONTAINED IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN
TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING ANY
PENALTIES THAT MAY BE IMPOSED BY THE CODE. THE FEDERAL TAX DISCUSSION CONTAINED
IN THIS PROSPECTUS WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE
TRANSACTION DESCRIBED IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD SEEK
ADVICE FROM THEIR OWN INDEPENDENT TAX ADVISORS CONCERNING THE FEDERAL, STATE AND
LOCAL TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY BASED ON THEIR PARTICULAR
CIRCUMSTANCES.

Subscription
Rights

Receipt.
Generally, the distribution by a corporation to the holders of its common stock
of rights to acquire its convertible preferred stock will be treated for tax
purposes as a distribution of the convertible preferred stock itself. The
distribution by a corporation of convertible preferred stock to holders of its
common stock will not be taxable unless the distribution of such stock would
result in a “disproportionate” distribution. A distribution of convertible
preferred stock will be treated as disproportionate when considering all
relevant facts and circumstances such as the time within which the conversion
right must be exercised, the dividend rate, the marketability of the stock and
the conversion price, the distribution is likely to result in some shareholders
exercising their conversion rights and receiving common stock and others
receiving money or other property. According to applicable Treasury regulations,
a distribution of convertible preferred stock is unlikely to result in a
disproportionate distribution under circumstances where (i) the conversion right
may be exercised over a long period (e.g., 20 years) and (ii) the dividend rate
is consistent with market conditions at the time the convertible preferred stock
is distributed. In contrast, Treasury regulations provide that a distribution of
convertible preferred stock is likely to result in a disproportionate
distribution under circumstances where (i) the conversion right must be
exercised within a relatively short period (e.g., four months) and (ii) taking
into account additional factors such as the conversion price, dividend rate,
redemption provisions and marketability of the convertible preferred stock it
may be anticipated that some shareholders will exercise their conversion right
and some will not. Because the determination of whether a distribution of
convertible preferred stock will be treated as disproportionate or not is based
on all relevant facts and circumstances, and because the applicable Treasury
regulations only provide specific guidance in the more extreme cases, it is not
possible to definitively conclude whether the distribution of the Series B
Preferred to holders of common stock would be considered to result in a
“disproportionate” distribution.

49

In the
event the IRS successfully asserts that your receipt of subscription rights is
currently taxable, the discussion under the heading “Alternative Treatment of
Subscription Rights” describes the tax consequences that will result from such a
determination. The remainder of the discussion under this heading “Subscription
Rights” assumes that the distribution of the subscription rights in the rights
offering will not result in a “disproportionate” distribution.

Tax
Basis and Holding Period. The tax basis of the subscription rights
received by a holder in the rights offering will be zero, unless (a) the fair
market value of the subscription rights on the date such subscription rights are
distributed is equal to at least 15% of the fair market value on such date of
the common stock with respect to which the subscription rights are received, or
(b) you elect, by attaching a statement to your federal income tax return for
the taxable year in which the subscription rights are received, to allocate
basis to the subscription rights, in either of which cases, your tax basis in
the common stock will be allocated between the common stock and the subscription
rights in proportion to their respective fair market values on the date the
subscription rights are distributed. Your holding period for the subscription
rights received in the rights offering will include your holding period for the
common stock with respect to which the subscription rights were
received.

Expiration.
You will not recognize any gain or loss if you allow the subscription rights
received in the rights offering to expire, and your tax basis is the common
stock with respect to which such subscription rights were distributed will be
equal to the tax basis of such common stock immediately before the receipt of
the subscription rights in the rights offering.

Alternative
Treatment of Subscription Rights

Receipt.If the
IRS were to successfully assert that the distribution of the subscription rights
in the rights offering resulted in a “disproportionate” distribution, each
holder would be considered to have received a distribution with respect to such
holder’s common stock in an amount equal to the fair market value of the
subscription rights received by such holder on the date of the distribution.
This distribution generally would be taxed as dividend income to the extent of
your ratable share of our current and accumulated earnings and profits. Under
current law for taxable years beginning prior to January 1, 2011, so long as
certain holding period requirements are satisfied, the maximum federal income
tax rate on most dividends received by individuals is generally 15%. Your tax
basis in the subscription rights received pursuant to the rights offering would
be equal to their fair market value on the date of distribution and the holding
period for the rights would begin upon receipt. The remainder of the discussion
under this heading “Alternative Treatment of the Subscription Rights” assumes
that a holder’s receipt of subscription rights in the rights offering is a
taxable event.

Expiration.
If your subscription rights lapse without being exercised, you will
recognize a capital loss equal to your tax basis in such expired subscription
rights. The deductibility of capital losses is subject to
limitations.

Exercise;
Tax Basis in and Holding Period of Series B Convertible Preferred
Stock

You will
not recognize any gain or loss upon the exercise of the subscription rights
received in the rights offering. The tax basis of the Series B Preferred
acquired through exercise of the subscription rights will equal the sum of the
subscription price for the Series B Preferred and your tax basis, if any, in the
subscription rights as described above. Your holding period for the Series B
Preferred acquired through exercise of the subscription rights will begin on the
date the subscription rights are exercised.

50

Series
B Convertible Preferred Stock

The
following is a summary of certain U.S. federal income tax and, for non-U.S.
holders (as defined below), estate tax consequences of the purchase, ownership,
conversion and disposition of the Series B Preferred and our common stock
received in respect thereof as of the date hereof. Except where noted, this
summary deals only with the Series B Preferred and our common stock held as
capital assets. As used herein, the term “U.S. holder”
means a beneficial owner of the Series B Preferred or our common stock that is
for U.S. federal income tax purposes:

●

an
individual citizen or resident of the United
States;

●

a
corporation (or any other entity treated as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of
Columbia;

●

an
estate the income of which is subject to U.S. federal income taxation
regardless of its source; or

●

a
trust if it (1) is subject to the primary supervision of a court
within the United States and one or more United States persons have the
authority to control all substantial decisions of the trust or
(2) has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States
person.

As used
herein, the term “non-U.S.
holder” means a beneficial owner of the Series B Preferred or our common
stock that is neither a U.S. holder nor a partnership (or other entity treated
as a partnership for U.S. federal income tax purposes).

This
summary is not a
detailed description of the U.S. federal income tax consequences applicable to
you if you are subject to special treatment under the U.S. federal income tax
laws, including if you are:

●

a
dealer in securities or currencies;

●

a
financial institution;

●

a
regulated investment company;

●

a
real estate investment trust;

●

an
insurance company;

●

a
tax-exempt organization;

●

a
person holding the Series B Preferred or our common stock as part of a
hedging, integrated, conversion or constructive sale transaction or a
straddle;

●

a
trader in securities that has elected the mark-to-market method of
accounting for your securities;

●

a
person liable for alternative minimum tax;

●

a
partnership or other pass-through entity for U.S. federal income tax
purposes;

●

a
person who is an investor in a pass-through entity;

●

a
U.S. holder whose “functional currency” is not the U.S.
dollar;

●

a
“controlled foreign corporation”;

●

a
“passive foreign investment company”; or

●

a
United States expatriate.

This
summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the “Code”), and
regulations, rulings and judicial decisions as of the date hereof. Those
authorities may be changed, perhaps retroactively, so as to result in U.S.
federal income and estate tax consequences different from those summarized
below.

51

If a
partnership holds the Series B Preferred or our common stock, the tax treatment
of a partner will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding the
Series B Preferred or our common stock, you should consult your own tax
advisors.

This
summary does not contain a detailed description of all the U.S. federal income
and estate tax consequences to you in light of your particular circumstances and
does not address the effects of any state, local or non-U.S. tax laws. If you
are considering the purchase, ownership or disposition of the Series B
Preferred, you should consult your own tax advisors concerning the U.S. federal
income and estate tax consequences to you in light of your particular situation
as well as any consequences arising under the laws of any other taxing
jurisdiction.

U.S.
Holders

Dividends.
Distributions on the Series B Preferred or our common stock will be dividends
for U.S. federal income tax purposes to the extent paid out of our current or
accumulated earnings and profits, as determined for U.S. federal income tax
purposes, and will be taxable as ordinary income, although possibly at reduced
rates, as discussed below. We cannot guarantee that our current and accumulated
earnings and profits will be such that all distributions paid with respect to
the Series B Preferred or our common stock will qualify as dividends for U.S.
federal income tax purposes. Our accumulated earnings and profits and our
current earnings and profits in future years will depend in significant part on
our future profits or losses, which we cannot accurately predict. To the extent
that the amount of any distribution paid on the Series B Preferred or our common
stock exceeds our current and accumulated earnings and profits attributable to
that share of the Series B Preferred or our common stock, the distribution will
be treated first as a tax-free return of capital and will be applied against and
will reduce the U.S. holder’s adjusted tax basis (but not below zero) in that
share of the Series B Preferred or our common stock. This reduction in basis
will increase any gain, or reduce any loss realized by the U.S. holder on the
subsequent sale, redemption or other disposition of the Series B Preferred or
our common stock. The amount of any such distribution in excess of the U.S.
holder’s adjusted tax basis will be taxed as capital gain. For purposes of the
remainder of the discussion under this heading, it is assumed that distributions
paid on the Series B Preferred or our common stock will constitute dividends for
U.S. federal income tax purposes.

If a U.S.
holder is a corporation, dividends that are received by it will generally be
eligible for a 70% dividends received deduction under the Code. However, the
Code disallows this dividends received deduction in its entirety if the Series B
Preferred or our common stock with respect to which the dividend is paid is held
by such U.S. holder for less than 46 days during the 91-day period beginning on
the date which is 45 days before the date on which the Series B Preferred or our
common stock becomes ex-dividend with respect to such dividend. (A 91-day
minimum holding period applies to any dividends on the Series B Preferred that
are attributable to periods in excess of 366 days.)

Under
current law, if a U.S. holder is an individual or other non-corporate holder,
dividends received by such U.S. holder generally will be subject to a reduced
maximum tax rate of 15% for taxable years beginning before January 1, 2011,
after which the rate applicable to dividends is scheduled to return to the tax
rate generally applicable to ordinary income. The rate reduction does not apply
to dividends received to the extent that U.S. holders elect to treat the
dividends as “investment income,” for purposes of the rules relating to the
limitation on the deductibility of investment-related interest, which may be
offset by investment expense. Furthermore, the rate reduction will also not
apply to dividends that are paid to such holders with respect to the Series B
Preferred or our common stock that is held by the holder for less than 61 days
during the 121-day period beginning on the date which is 60 days before the date
on which the Series B Preferred or our common stock become ex-dividend with
respect to such dividend. (A 91-day minimum holding period applies to any
dividends on the Series B Preferred that are attributable to periods in excess
of 366 days.)

52

In
general, for purposes of meeting the holding period requirements for both the
dividends received deduction and the reduced maximum tax rate on dividends
described above, U.S. holders may not count towards their holding period any
period in which they (a) have the option to sell, are under a contractual
obligation to sell, or have made (and not closed) a short sale of the Series B
Preferred or our common stock, as the case may be, or substantially identical
stock or securities, (b) are the grantor of an option to buy the Series B
Preferred or our common stock, as the case may be, or substantially identical
stock or securities or (c) otherwise have diminished their risk of loss on
the Series B Preferred or our common stock, as the case may be, by holding one
or more other positions with respect to substantially similar or related
property. The U.S. Treasury regulations provide that a taxpayer has diminished
its risk of loss on stock by holding a position in substantially similar or
related property if the taxpayer is, including, without limitation, the
beneficiary of a guarantee, surety agreement or similar arrangement that
provides for payments that will substantially offset decreases in the fair
market value of the stock. In addition, the Code disallows the dividends
received deduction as well as the reduced maximum tax rate on dividends if the
recipient of a dividend is obligated to make related payments with respect to
positions in substantially similar or related property. This disallowance
applies even if the minimum holding period has been met. U.S. holders are
advised to consult their own tax advisors regarding the implications of these
rules in light of their particular circumstances.

U.S.
holders that are corporations should consider the effect of Section 246A of
the Code, which reduces the dividends received deduction allowed with respect to
“debt-financed portfolio stock.” The Code also imposes a 20% alternative minimum
tax on corporations. In some circumstances, the portion of dividends subject to
the dividends received deduction will serve to increase a corporation’s minimum
tax base for purposes of the determination of the alternative minimum tax. In
addition, a corporate U.S. holder may be required to reduce its basis in stock
with respect to certain “extraordinary dividends”, as provided under
Section 1059 of the Code. U.S. holders should consult their own tax
advisors in determining the application of these rules in light of their
particular circumstances.

Sale
or Other Disposition. A sale, exchange, or other disposition of the
Series B Preferred or our common stock will generally result in gain or loss
equal to the difference between the amount realized upon the disposition (not
including any amount attributable to declared and unpaid dividends, which will
be taxable as described above to U.S. holders of record who have not previously
included such dividends in income) and a U.S. holder’s adjusted tax basis in the
Series B Preferred or our common stock, as the case may be. Such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
U.S. holder’s holding period for the Series B Preferred or our common stock, as
applicable, exceeds one year. Under current law, if a U.S. holder is an
individual or other non-corporate holder, net long-term capital gain realized by
such U.S. holder is subject to a reduced maximum tax rate of 15%. For taxable
years beginning on or after January 1, 2011, the maximum rate is scheduled
to return to the previously effective 20% rate. The deduction of capital losses
is subject to limitations.

Conversion
of the Series B Convertible Preferred Stock into Common Stock. As a
general rule, a U.S. holder will not recognize any gain or loss in respect of
the receipt of common stock upon the conversion of the Series B Preferred. The
adjusted tax basis of common stock received on conversion will equal the
adjusted tax basis of the Series B Preferred converted (reduced by the portion
of adjusted tax basis allocated to any fractional common stock exchanged for
cash, as described below), and the holding period of such common stock received
on conversion will generally include the period during which the converted
Series B Preferred was held prior to conversion.

53

Cash
received in lieu of a fractional share of our common stock will generally be
treated as a payment in a taxable exchange for such fractional share of our
common stock, and capital gain or loss will be recognized on the receipt of cash
in an amount equal to the difference between the amount of cash received and the
amount of adjusted tax basis allocable to the fractional share of our common
stock. Any cash received attributable to any declared and unpaid dividends on
the Series B Preferred will be treated as described above under “—U.S.
Holders—Dividends.”

In the
event a U.S. holder’s Series B Preferred is converted pursuant to certain
transactions, including our consolidation or merger into another person (see
“Description of the Series B Convertible Preferred Stock”), the tax treatment of
such a conversion will depend upon the facts underlying the particular
transaction triggering such a conversion. Each U.S. holder should consult its
tax adviser to determine the specific tax treatment of a conversion under such
circumstances.

Adjustment
of Conversion Rate. The conversion rate of the Series B Preferred is
subject to adjustment under certain circumstances. U.S. Treasury regulations
promulgated under Section 305 of the Code would treat a U.S. holder of the
Series B Preferred as having received a constructive distribution includable in
such U.S. holder’s income in the manner as described above under “—U.S.
Holders—Dividends,” above, if and to the extent that certain adjustments in the
conversion rate increase the proportionate interest of a U.S. holder in our
earnings and profits. For example, an increase in the conversion rate to reflect
a taxable dividend to holders of common stock will generally give rise to a
deemed taxable dividend to the holders of the Series B Preferred to the extent
of our current and accumulated earnings and profits. In addition, an adjustment
to the conversion rate of the Series B Preferred or a failure to make such an
adjustment could potentially give rise to constructive distributions to U.S.
holders of our common stock. Thus, under certain circumstances, U.S. holders may
recognize income in the event of a constructive distribution even though they
may not receive any cash or property. Adjustments to the conversion rate made
pursuant to a bona fide reasonable adjustment formula which has the effect of
preventing dilution in the interest of the U.S. holders of the Series B
Preferred, however, will generally not be considered to result in a constructive
dividend distribution.

Information
Reporting and Backup Withholding. In general, information reporting will
apply to dividends in respect of the Series B Preferred or our common stock and
the proceeds from the sale, exchange or other disposition of the Series B
Preferred or our common stock that are paid to a U.S. holder within the United
States (and in certain cases, outside the United States), unless a U.S. holder
is an exempt recipient such as a corporation. Backup withholding may apply to
such payments if a U.S. holder fails to provide a taxpayer identification number
or certification of other exempt status or fails to report in full dividend and
interest income.

Any
amounts withheld under the backup withholding rules will be allowed as a refund
or a credit against a U.S. holder’s U.S. federal income tax liability provided
the required information is furnished to the IRS.

Non-U.S.
Holders

Dividends.
Dividends (including any constructive distributions taxable as dividends) paid
to a non-U.S. holder of the Series B Preferred or our common stock generally
will be subject to withholding of U.S. federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
within the United States by the non-U.S. holder (and, if required by an
applicable income tax treaty, are attributable to a United States permanent
establishment) are not subject to the withholding tax, provided certain
certification and disclosure requirements are satisfied. Instead, such dividends
are subject to U.S. federal income tax on a net income basis in the same manner
as if the non-U.S. holder were a United States person as defined under the Code.
Any such effectively connected dividends received by a foreign corporation may
be subject to an additional “branch profits tax” at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.

54

A
non-U.S. holder of the Series B Preferred or our common stock who wishes to
claim the benefit of an applicable treaty rate and avoid backup withholding, as
discussed below, for dividends will be required (a) to complete Internal
Revenue Service Form W-8BEN (or other applicable form) and certify under penalty
of perjury that such holder is not a United States person as defined under the
Code and is eligible for treaty benefits or (b) if the Series B Preferred
or our common stock is held through certain foreign intermediaries, to satisfy
the relevant certification requirements of applicable United States Treasury
regulations. Special certification and other requirements apply to certain
non-U.S. holders that are pass-through entities rather than corporations or
individuals.

A
non-U.S. holder of the Series B Preferred or our common stock eligible for a
reduced rate of United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for refund with the Internal Revenue Service.

Sale
or Other Disposition. Any gain realized on the disposition of the Series
B Preferred or our common stock (including, in the case of conversion, the
deemed exchange that gives rise to a payment of cash in lieu of a fractional
share of our common stock) generally will not be subject to U.S. federal income
tax unless:

●

the
gain is effectively connected with a trade or business of the non-U.S.
holder in the United States (and, if required by an applicable income tax
treaty, is attributable to a United States permanent establishment of the
non-U.S. holder);

●

the
non-U.S. holder is an individual who is present in the United States for
183 days or more in the taxable year of that disposition (or deemed to
have been present in the United States for 183 days or more in such
taxable year based on a weighted factor of the number of days present in
the United States over the past three years), and certain other conditions
are met; or

●

we
are or have been a “United States real property holding corporation” for
U.S. federal income tax purposes.

An
individual non-U.S. holder described in the first bullet point immediately above
will be subject to tax on the net gain derived from the sale under regular
graduated U.S. federal income tax rates. An individual non-U.S. holder described
in the second bullet point immediately above will be subject to a flat 30% tax
on the gain derived from the sale, which may be offset by United States source
capital losses, even though the individual is not considered a resident of the
United States. If a non-U.S. holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to tax on its net
gain in the same manner as if it were a United States person as defined under
the Code and, in addition, may be subject to the branch profits tax equal to 30%
of its effectively connected earnings and profits or at such lower rate as may
be specified by an applicable income tax treaty.

We
believe we are not and do not anticipate becoming a “United States real property
holding corporation” for U.S. federal income tax purposes so withholding rules
related to such corporations will not be applicable.

55

Conversion
into Common Stock. Non-U.S. holders will generally not recognize any gain
or loss in respect of the receipt of common stock upon the conversion of the
Series B Preferred, except with respect to any cash received in lieu of a
fractional share of our common stock that is taxable as described above under
“—Non-U.S. Holders—Sale or Other Disposition.”

Adjustment
of Conversion Rate. As described above under “—U.S. Holders—Adjustment of
Conversion Rate”, adjustments in the conversion rate (or failures to adjust the
conversion rate) that increase the proportionate interest of a non-U.S. holder
in our earning and profits could result in deemed distributions to the non-U.S.
holder that are taxed as described under “—Non-U.S.
Holders—Dividends.”

Federal
Estate Tax

The
Series B Preferred and common stock owned or treated as owned by an individual
who is not a citizen or resident of the United States (as specially defined for
U.S. federal estate tax purposes) at the time of death will be included in the
individual’s gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax or other treaty provides otherwise and, therefore, may be
subject to U.S. federal estate tax.

Information
Reporting and Backup Withholding

We must
report annually to the Internal Revenue Service and to each non-U.S. holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty.

A
non-U.S. holder will be subject to backup withholding for dividends paid to such
holder unless such holder certifies under penalty of perjury that it is a
non-U.S. holder (and the payor does not have actual knowledge or reason to know
that such holder is a United States person as defined under the Code), or such
holder otherwise establishes an exemption.

Information
reporting and, depending on the circumstances, backup withholding will apply to
the proceeds of a sale of the Series B Preferred or our common stock within the
United States or conducted through certain United States-related financial
intermediaries, unless the beneficial owner certifies under penalty of perjury
that it is a non-U.S. holder (and the payor does not have actual knowledge or
reason to know that the beneficial owner is a United States person as defined
under the Code), or such owner otherwise establishes an exemption.

Any
amounts withheld under the backup withholding rules may be allowed as a refund
or a credit against a non-U.S. holder’s U.S. federal income tax liability
provided the required information is furnished to the Internal Revenue
Service.

56

CERTAIN
ERISA CONSIDERATIONS

Each
person considering the use of plan assets of a pension, profit-sharing or other
employee benefit plan, individual retirement account, Keogh plan or other
retirement plan, account or arrangement, or a “plan,” to
acquire or hold the Series B Preferred should consider whether an investment in
the Series B Preferred (and the common stock issuable upon conversion of the
Series B Preferred) would be consistent with the documents and instruments
governing the plan, and whether the investment would involve a prohibited
transaction under Section 406 of the Employee Retirement Income Security
Act of 1974, as amended, or “ERISA,” or
Section 4975 of the Code.

Section 406
of ERISA and Section 4975 of the Code prohibit plans subject to Title I of
ERISA and/or Section 4975 of the Code including entities such as collective
investment funds, partnerships and separate accounts or insurance company pooled
separate accounts or insurance company general accounts whose underlying assets
include the assets of such plans, or collectively, “Plans,” from
engaging in certain transactions involving “plan assets” with persons who are
“parties in interest” under ERISA or “disqualified persons” under the Code, or
“parties in
interest,” with respect to the Plan. A violation of these prohibited
transaction rules may result in civil penalties or other liabilities under ERISA
and/or an excise tax under Section 4975 of the Code for those persons,
unless exemptive relief is available under an applicable statutory, regulatory
or administrative exemption. Certain plans including those that are governmental
plans (as defined in Section 3(32) of ERISA), certain church plans (as
defined in Section 3(33) of ERISA) and foreign plans (as described in
Section 4(b)(4) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code but may be subject to similar provisions under
applicable federal, state, local, foreign or other regulations, rules or laws,
or “Similar Laws.”

The
acquisition or holding of the Series B Preferred (and the common stock issuable
upon conversion of the Series B Preferred) by a Plan with respect to which we or
certain of our affiliates is or becomes a party in interest may constitute or
result in prohibited transactions under ERISA or Section 4975 of the Code,
unless the Series B Preferred (or such common stock) is acquired or held
pursuant to and in accordance with an applicable exemption.

Accordingly,
the Series B Preferred (and the common stock issuable upon conversion of the
Series B Preferred) may not be purchased or held by any Plan or any person
investing “plan assets” of any Plan, unless such purchase or holding is eligible
for the exemptive relief available under a Prohibited Transaction Class
Exemption, or “PTCE,” such
as PTCE 96-23, PTCE 95-60, PTCE 91-38, PTCE 90-1 or PTCE 84-14 issued by the
U.S. Department of Labor or there is some other basis on which the purchase or
holding of the Series B Preferred (or such common stock) is not prohibited, such
as the exemption under Section 408(b)(17) of ERISA and
Section 4975(d)(20) of the Code, or the “Service Provider
Exemption,” for certain transactions with non-fiduciary service providers
for transactions that are for adequate consideration. Each purchaser or holder
of the Series B Preferred (and the common stock issuable upon conversion of the
Series B Preferred) or any interest therein, and each person making the decision
to purchase or hold the Series B Preferred (or such common stock) on behalf of
any such purchaser or holder will be deemed to have represented and warranted in
both its individual capacity and its representative capacity (if any), that on
each day from the date on which the purchaser or holder acquires its interest in
the Series B Preferred (or the common stock issuable upon conversion of the
Series B Preferred) to the date on which the purchaser disposes of its interest
in the Series B Preferred (or such common stock), that such purchaser and
holder, by its purchase or holding of the Series B Preferred (or such common
stock) or any interest therein that (a) its purchase and holding of the
Series B Preferred (and the common stock issuable upon conversion of the Series
B Preferred) is not made on behalf of or with “plan assets” of any Plan, or
(b) if its purchase and holding of the Series B Preferred (and the common
stock issuable upon conversion of the Series B Preferred) is made on behalf of
or with “plan assets” of a Plan, then (i) its purchase and holding of the
Series B Preferred (and the common stock issuable upon conversion of the Series
B Preferred) will not result in a non-exempt prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code and (ii) neither
Reed’s, Inc. nor any of our affiliates is acting as a fiduciary (within the
meaning of Section 3(21)) of ERISA in connection with the purchase or
holding of the Series B Preferred (and the common stock issuable upon conversion
of the Series B Preferred) and has not provided any advice that has formed or
may form a basis for any investment decision concerning the purchase or holding
of the Series B Preferred. Each purchaser and holder of the Series B Preferred
(and the common stock issuable upon conversion of the Series B Preferred) or any
interest therein on behalf of any governmental plan will be deemed to have
represented and warranted by its purchase or holding of the Series B Preferred
or any interest therein that such purchase and holding does not violate any
applicable Similar Laws or rules.

57

Due to
the complexity of these rules and the penalties that may be imposed upon persons
involved in nonexempt prohibited transactions, it is important that fiduciaries
or other persons considering purchasing the Series B Preferred on behalf of or
with “plan assets” of any plan or plan asset entity consult with their counsel
regarding the availability of exemptive relief under any of the PTCEs listed
above or any other applicable exemption, or the potential consequences of any
purchase or holding under similar laws, as applicable.

MATERIAL
CHANGES

None.

INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE

We
incorporate by reference the filed documents listed below, except as superseded,
supplemented or modified by this prospectus, and any future filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”):

(a)

Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008, as filed March 27, 2009;

(b)

Our Current Reports on Form 8-K
filed with the SEC January 6, 2009 and January 26,
2009;

(d)

All other reports filed pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), since the end of the fiscal year
covered by the annual report referred to in paragraph (a) above;
and

(e)

The
description of our capital stock that is contained in our Registration
Statement on Form S-1 (File No.),
as filed November 20, 2008.

In
addition, all documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference into this Registration Statement and to be a
part hereof from the date of filing of such documents.

Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.

58

We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered a copy of any or all of the information that has been incorporated by
reference herein without charge by written or oral request directed to Reed’s,
Inc., 13000 South Spring Street, Los Angeles, California 90061,
Attention: Christopher J. Reed or (310) 217-9400.

You
should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any prospectus supplement is accurate
as of any date other than the date on the front of those documents.

DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES

Section
145 of the Delaware General Corporation Law (the “DGCL”), as the same exists or
may hereafter be amended, provides that a Delaware corporation may indemnify any
persons who were, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation’s best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his or her conduct was illegal. A Delaware corporation may
indemnify any persons who are, were or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys’ fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporation’s best interests, provided that no
indemnification is permitted without judicial approval if the officer, director,
employee or agent is adjudged to be liable to the corporation. Where an officer,
director, employee, or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses which such officer or director has actually and
reasonably incurred.

Section
145 of the DGCL further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, arising out of his or her status as such, whether or not the
corporation would otherwise have the power to indemnify him or her under Section
145 of the DGCL.

59

Our
amended certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, as it may be amended from time to time, none of our
directors will be personally liable to us or our stockholders for monetary
damages resulting from a breach of fiduciary duty as a director. Our amended
certificate of incorporation also provides discretionary indemnification for the
benefit of our directors, officers, and employees, to the fullest extent
permitted by Delaware law, as it may be amended from time to time. Pursuant to
our bylaws, we are required to indemnify our directors, officers, employees and
agents, and we have the discretion to advance his or her related expenses, to
the fullest extent permitted by law.

We do
currently provide liability insurance coverage for our directors and
officers.

These
indemnification provisions may be sufficiently broad to permit indemnification
of our officers and directors for liabilities (including reimbursement of
expenses incurred) arising under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our
directors or officers, or persons controlling us, pursuant to the foregoing
provisions, we have been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment of expenses incurred or paid by
a director, officer or controlling person in a successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

We have
filed with the SEC a registration statement on Form S-3 under the Securities Act
with respect to the shares of Series B Preferred offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules filed therewith. For further information about us and the
common stock offered hereby, reference is made to the registration statement and
the exhibits and schedules filed therewith. Statements contained in this
prospectus regarding the contents of any contract or any other document that is
filed as an exhibit to the registration statement are not necessarily complete,
and each such statement is qualified in all respects by reference to the full
text of such contract or other document filed as an exhibit to the registration
statement.

No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by us. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by anyone in
any jurisdiction in which the offer or solicitation is not authorized or is
unlawful.

10,000,000
Nontransferable Rights to Subscribe for up to 150,000 Shares of

Series
B Convertible Preferred Stock at $10.00 per Share

______________________________

PROSPECTUS

______________________________

May ,
2009

PART II

INFORMATION
NOT REQUIRED IN PROSPECTUS

Item
14. Other
Expenses of Issuance and Distribution.

The
following table sets forth the expenses payable by us in connection with this
offering of securities described in this registration statement. All
amounts shown are estimates, except for the SEC and FINRA registration
fee. The Registrant will bear all expenses shown below.

SEC
filing fee

$

558

FINRA
filing fee

$

1,500

Accounting
fees and expenses

$

10,000

Legal
fees and
expenses

$

33,000

Printing
and engraving expenses

$

15,000

Other
(including subscription and information agent fees)

$

40,000

Total

$

100,058

___________________

(1) Assumes
all of the 150,000 shares of Series B Preferred being registered are
sold.

Item
15. Indemnification
of Directors and Officers.

Section
145 of the Delaware General Corporation Law (the “DGCL”), as the same exists or
may hereafter be amended, provides that a Delaware corporation may indemnify any
persons who were, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation’s best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his or her conduct was illegal. A Delaware corporation may
indemnify any persons who are, were or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys’ fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporation’s best interests, provided that no
indemnification is permitted without judicial approval if the officer, director,
employee or agent is adjudged to be liable to the corporation. Where an officer,
director, employee, or agent is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses which such officer or director has actually and
reasonably incurred.

Section
145 of the DGCL further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, arising out of his or her status as such, whether or not the
corporation would otherwise have the power to indemnify him or her under Section
145 of the DGCL.

II-1

Our
amended certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, as it may be amended from time to time, none of our
directors will be personally liable to us or our stockholders for monetary
damages resulting from a breach of fiduciary duty as a director. Our amended
certificate of incorporation also provides discretionary indemnification for the
benefit of our directors, officers, and employees, to the fullest extent
permitted by Delaware law, as it may be amended from time to time. Pursuant to
our bylaws, we are required to indemnify our directors, officers, employees and
agents, and we have the discretion to advance his or her related expenses, to
the fullest extent permitted by law.

We do
currently provide liability insurance coverage for our directors and
officers.

These
indemnification provisions may be sufficiently broad to permit indemnification
of our officers and directors for liabilities (including reimbursement of
expenses incurred) arising under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our
directors or officers, or persons controlling us, pursuant to the foregoing
provisions, we have been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

In the
event that a claim for indemnification against such liabilities (other than the
payment of expenses incurred or paid by a director, officer or controlling
person in a successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to the court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however
, that paragraphs (i), (ii) and (iii) do not apply if the
Registration Statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement;

II-2

(2) that,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;

(3) to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering;

(4) that,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:

(A) Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and

(B) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or
(x) for the purpose of providing the information required by Section 10(a)
of the Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of
securities in the offering described in prospectus. As provided in
Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date
of the registration statement relating to the securities in the registration
statement to which the prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Provided, however ,
that no statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
effective date; and

(5) that,
for the purpose of determining liability of the Registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities, the
undersigned Registrant undertakes that in a primary offering of securities of
the undersigned Registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:

(i) Any
preliminary prospectus or prospectus of the undersigned Registrant relating to
the offering required to be filed pursuant to Rule 424;

(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned
Registrant;

(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its securities provided
by or on behalf of an undersigned Registrant; and

(iv) Any
other communication that is an offer in the offering made by the undersigned
Registrant to the purchaser.

(b) The
undersigned Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of Registrant’s annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(c) The
undersigned registrant hereby undertakes that: (i) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of the registration statement
in reliance upon Rule 430A and contained in the form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration statement as of
the time it was declared effective; and (ii) for the purpose of determining
any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
..

(d) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-3

SIGNATURES

In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and authorized this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on May 4, 2009.

REED’S, INC.

By:

/s/
Christopher J. Reed

Christopher J. Reed

Chief Executive Officer

POWER
OF ATTORNEY

KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Christopher J. Reed his/her true and lawful
attorney-in-fact and agent with full power of substitution and re-substitution,
for him/her and in his/her name, place and stead, in any and all capacities to
sign any or all amendments (including, without limitation, post-effective
amendments) to this Registration Statement, any related Registration Statement
filed pursuant to Rule 462(b) under the Securities Act of 1933 and any or all
pre- or post-effective amendments thereto, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming that said attorney-in-fact and agent, or any substitute or
substitutes for him, may lawfully do or cause to be done by virtue
hereof.

Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
stated.

In
accordance with the requirements of the Securities Act of 1933, as amended, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

Signature

Title

Date

/s/ Christopher J. Reed

Chief Executive Officer,
Chairman of the board of directors

(Principal Executive
Officer)

May
4, 2009

Christopher J. Reed

/s/ James
Linesch

Chief
Financial Officer (Principal Accounting Officer)

May
4, 2009

James
Linesch

/s/ Judy Holloway Reed

Director

May
4, 2009

Judy Holloway Reed

/s/ Mark Harris

Director

May
4, 2009

Mark Harris

/s/ Daniel S.J. Muffoletto

Director

May
4, 2009

Daniel S.J. Muffoletto

/s/ Michael Fischman

Director

May
4, 2009

Michael Fischman

EXHIBIT
INDEX

3.1

Certificate
of Incorporation of Reed’s, Inc. as filed September 7, 2001 (Incorporated
by reference to Exhibit 3.1 to Reed’s, Inc.’s Registration Statement on
Form SB-2 (File No. 333-120451))

3.2

Certificate
of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed
September 27, 2004 (Incorporated by reference to Exhibit 3.2 to Reed’s,
Inc.’s Registration Statement on Form SB-2 (File No.
333-120451))

3.3

Certificate
of Amendment of Certificate of Incorporation of Reed’s, Inc. as filed
December 18, 2007 (Incorporated by reference to Exhibit 3.3 to Reed’s,
Inc.’s Registration Statement on Form S-1 (File No.
333-156908))

3.4

Certificate
of Designations, Preferences and Rights of Series A Preferred Stock of
Reed’s, Inc. as filed October 12, 2004(Incorporated by reference to
Exhibit 3.3 to Reed’s, Inc.’s Registration Statement on Form SB-2 (File
No. 333-120451))

3.5

Certificate
of Correction to Certificate of Designations as filed November 10,
2004(Incorporated by reference to Exhibit 3.4 to Reed’s, Inc.’s
Registration Statement on Form SB-2 (File No.
333-120451))

3.6

Bylaws
of Reed’s Inc., as amended (Incorporated by reference to Exhibit 3.5 to
Reed’s, Inc.’s Registration Statement on Form SB-2 (File No.
333-120451))

3.7

Certificate
of Designations, Preferences and Rights of Series B Convertible Preferred
Stock *

4.1

Form
of common stock certificate (Incorporated by reference to Exhibit 4.1 to
Reed’s, Inc.’s Registration Statement on Form SB-2 (File No.
333-120451))

4.2

Form
of Series A Convertible Preferred Stock certificate (Incorporated by
reference to Exhibit 4.2 to Reed’s, Inc.’s Registration Statement on Form
SB-2 (File No. 333-120451))

Loan
and Security Agreement between Reed’s Inc. and First Capital Western
Region LLC dated May 30, 2008 ( Incorporated by reference to Exhibit 10.1
to Reed’s, Inc.’s Current Report on Form 8K dated July 16,
2008)

10.16

Amendment
Number One to Loan and Security Agreement between Reed’s Inc. and First
Capital Western Region LLC dated June 16, 2008 (Incorporated by reference
to Exhibit 10.1 to Reed’s, Inc.’s Current Report on Form 8K dated July 23,
2008)

10.17

Amendment
Number Two to Loan and Security Agreement between Reed’s Inc. and First
Capital Western Region LLC dated June 16, 2008 (Incorporated by reference
to Exhibit 10.17 to Reed’s, Inc.’s Registration Statement on Form S-1
(File No. 333-156908))

10.18

Amendment
Number Three to Loan and Security Agreement between Reed’s Inc. and First
Capital Western Region LLC dated September 24, 2008 (Incorporated by
reference to Exhibit 10.18 to Reed’s, Inc.’s Registration Statement on
Form S-1 (File No. 333-156908))

Amendment
Number Four to Loan and Security Agreement between Reed's Inc., and First
Capital Western Region LLC dated March 27, 2009 (Incorporated by reference
to Exhibit 10.24 to Reed’s, Inc.’s Annual Report on Form 10K filed March
27, 2009)

14.1

Code
of Ethics (Incorporated by reference to Exhibit 14.1 to Reed’s, Inc.’s
Registration Statement on Form SB-2 (File No. 333-157359))

21

Subsidiaries
of Reed’s, Inc. (Incorporated by reference to Exhibit 21.1 to Reed’s,
Inc.’s Annual Report on Form 10KSB for the period ended December 31,
2007)